BigLaw leaders have many things to think about when guiding their firms to Top 100 finishes. One major item is the need to respond to client expectations of value.  The idea that clients expect value in the legal services they buy is not a radical idea.  As long as law firms have had clients, there has been an expectation by them that they are entitled to bang for their buck.  But as BigLaw leaders and their clients will tell anyone willing to listen, the pursuit and assessment of value has become increasingly more sophisticated.

Today corporate clients and large law firms are communicating constantly about fee arrangements, pricing proposals and expectations of value.  These discussions frequently go beyond the idea of adjusting rates downward, creating budgets, or constricting hours to be worked.  Pricing proposal experts and legal operations professionals join together with client general counsels and law firm partners to arrive at a transparent approach that makes sense for client and firm.  Indeed, corporate clients and BigLaw realize that finding an arrangement that satisfies both is essential to a long and lasting relationship. And while a one-sided deal might be a win for one party, it will only be so for the short-term.

Law firms smaller than BigLaw might not have the ability to hire pricing professionals and legal operations teams. Similarly, their clients may not have the infrastructure to provide sophisticated grading of legal services. But make no mistake, the key to law firm success, regardless of firm size, is the transparent delivery of value that clients recognize.  So, law firms of any size should take a cue from their big brothers and sisters and think about the five following things:

The Value Proposition is a Pre-service Action Item.  Before work gets started for the client, it is essential to focus on client expectations.  Jumping into an engagement not knowing what the client wants substantively and financially is courting trouble.  Blindly starting work is like embarking on an expedition through a jungle without an experienced guide.

Talking About Value Doesn’t Have to be Uncomfortable.  Before getting started on a client matter a serious conversation about the elements that make up the client’s views on value should be had.  Indeed, an unemotional talk about expectations shows your client that you are thoughtful and result oriented.  It is a comfortable communication because it is welcomed.  Compare that kind of dialogue to the one over already charged fees that are a multiple of what the client expected.  Talk about uncomfortable.

The Payment of Your Fees May Not Represent a Good Report Card.  Just because a client has paid your fees does not mean the client is satisfied.  A client may not be confrontational, it might view the services unhappily but is ready to move on or may simply pay reflexively. But as time passes, that client may cool to the relationship and eagerly move on to another firm.  It may be surprising, but the payment of a fee may be the beginning of passive/aggressive client behavior that portends trouble.

Value and Understanding Go Together.  Closely aligned with the idea that value is a pre-action item, continually hearing from the client about its perception of the value received is the key to understanding client needs and guiding law firm behavior.  Just because you had the “talk” with the client at the outset does not mean that you are done trying to understand the client’s substantive and financial expectations.  Constant dialogue about value keeps you informed and makes the relationship a transparent one.

Value Means Repeat Business.  If a client perceives that it is receiving value, it is less likely to try another law firm.  Delivering value makes it hard for the client to move out of its comfort zone-the one provided by you.  Moreover, the interactive process with the client that defines value likely will set your law firm apart from competitors.  All of that makes repeat business more likely.

Many of the larger law firms are focusing on understanding the kind of value that clients recognize and appreciate.  Even though BigLaw may be leading in this realm, understanding the value equation is not a function of law firm size.  Is your firm, whatever its size, proactively working with its clients in search of that win/win solution?

 

I have been preparing for a managing partner leadership conference. One of the topics I am discussing is law firm Key Performance Indicators “KPI.” In reviewing recent articles and posts on the issue I was struck by two things:

  • the disproportionate representation of relatively short-term performance snapshots; versus,
  • the almost total absence of the two most important factors for any business, including law firms.

Ask any executive associated with the leadership of a law firm to define the most important asset of their firm. Virtually all will either say, “our people” or “our clients.” A handful might say both our clients and our people.

Yet the dominant metrics in most law firm KPIs include revenue per …, profits per …, productivity per …, debt per …and so on.  In my experience, it is rare to see a metric that reflects the loyalty/satisfaction of the firm’s clients or its people.  This is startling when you compare this with what firms say is most important.

Add to this the following:

Our clients are our most important asset

BDO, the mega-advisory firm, surveyed more than 100 in-house counsel regarding change they are experiencing. As described here, the report which includes a lot of interesting findings, described one result I found fascinating, “Thirty-six percent of legal departments are contemplating throwing over their current outside law firms in favor of new ones.” This is more than one-third —This should be frightening to firms that are only able to guess about the loyalty of their clients.

Our people are our most important asset

There has been much written for years about the dissatisfaction level of lawyers with their chosen profession. This article at Attorney at Work, and a related study here, describe the increasing and expensive level of turnover in law firms. According to the article, the combined annual cost to the 400 largest U.S. law firms approximates $9 billion, and this doesn’t count the cost of dissatisfaction among law firm professionals and support staff.

The Number One Worst Job?

The point of this post isn’t turnover per se, but the unhappiness that drives turnover. It seems undeniable that to a significant degree the practice of law in today’s environment equates to dissatisfaction. This Above the Law post describes a study that found the number one worst job in America to be an “associate attorney.”

In case we need to underscore the problem, the dissatisfaction in law firms isn’t restricted to associate lawyers. A very recent post by, my friend and marketing strategist, Eric Fletcher discusses lateral turnover (mainly partners), and the fact that a quarter of hired laterals leave the firm they joined within three years..half leave within five years.

Happy people generally stay where they are and unhappy people leave.

Why Should You Care?

If those KPIs that chart the short term — especially profits per— look good for the next two or three quarters, it is tempting to operate as if everything is fine. And if those metrics don’t look good, you’ll take steps to correct them, right?

But if you’re uncomfortable repeatedly addressing baseline problems with short term KPIs, and the unhappiness of colleagues isn’t enough to get your attention, here’s why you should take steps now to address the real issue.

Unhappy people don’t do their best work and clients sense the unhappiness. Law.com had thisgreat article in January in which the relationship between unhappy lawyers and clients is discussed. Here are three telling quotes from that article,

“Clients we interview also say how important it is to have lawyers who love what they do and are passionate about their work, and not wallowing in negativity about their frustration with fellow partners or firm dynamics,” 

“There are clear credit wars within the firm that drive behavior that is counter to great client service. We have received calls from partners asking us to make sure when we send the firm a matter to send it directly to them,” one client said.

“There is a noticeable tension between a few lawyers. I don’t need to know or want to know if they have issues, but it certainly raises eyebrows when fellow partners are not getting along” 

If your firm is serious about long term stability it will pay at least as much attention to these two long term KPIs — how your clients feel about the firm, and how your people feel about the firm.

Does your firm know?

As more law firm mergers are announced, the idea of pursuing a merger crosses many a law firm leader’s mind.  The idea of grabbing greater market share, entering distant markets, bolstering capabilities, or addressing succession can spur thoughts of combination.  Those potential results or outcomes can seem compelling and cause a firm to jump into the merger game with both feet.  But because mergers don’t always guaranty success and can actually undermine the stability of a firm if not done correctly, a careful and disciplined approach to merger is essential.

Whether embarking on merger for the first time or being well versed through experience, leadership considering merger should keep five key elements in mind to assure that its efforts are disciplined.  By making its pursuit of merger touch upon these five fundamentals, a management team gives its firm the best potential for success.

When pursuing merger, the following five essentials should be non-negotiable:

Approach Merger with a Non-merger Strategy in Mind.  Merger is not an end in itself.  Rather, the tactic of merger should serve a distinct firm strategy that is advanced by merger.  The firm strategy may pertain to growing the firm’s substantive capabilities, building out existing expertise or adding market share in areas the firm already competes.  Merger can be the means to get to where the firm wants to be.  But a merger not based on furthering a non-merger strategy is a hollow exercise, and one that is best avoided.  For this reason, firm leadership should clearly identify the firm’s strategy that is served by merger before embarking on the idea of merger.

Look for a Combination that Serves the Non-merger Strategy.  Once the decision is made to pursue the furtherance of a firm strategy through the tactic of merger, it is only logical to confine the search for a merger candidate to those firms that fulfill the firm’s objectives.  For that reason, the firm should take its time to identify the essential characteristics of any potential merger candidate.    As the process goes on, many potential merger candidates presented may be bright and shiny, but do not have the characteristics previously deemed important. A disciplined firm is not swayed by otherwise exciting firms willing to merge if the essential elements needed for the firm’s strategy are lacking.

Only Pursue Compatible Firms.  Believe it or not, a merger candidate may meet all the strategic criteria but can still be a horrible choice.  Once a potential merger candidate shows that it meets the firm’s strategic imperatives, its compatibility must be carefully examined.  Determining whether a firm is compatible often requires focusing on five compatibility metrics:           culture, finances, clients, compensation, and operations.  Upon testing those metrics for the two potential marriage partners, the compatibility of the two firms will become clearer.  If compatibility is not present, it is best to continue looking.

Make Integration a High Priority.  As hard as it can be to put a merger together and get to the closing table, it can be even harder to integrate the two firms once closing occurs.  Disciplined firms in the merger game thoroughly consider the idea of integration, map out steps to a successful integration, and discuss it with their merger partner-before closing.  Discussions with the merger partner should be held about blending systems, processes and procedures so that all personnel feel that they belong to the resulting firm.  Consistent treatment of professionals and non-professionals alike will contribute to forming a new firm with a unified culture.  If prior to merger the integration of the two firms looks to be too difficult, passing on the proposed merger may be advisable.

Be Selective.  In most instances, a firm that pursues merger is not compelled to merge.  It can walk away if it needs to.  But because merger discussions can be time consuming and create an excitement about the future, momentum in favor of merger sometimes can prove overwhelming. Letting deal fever force a merger is unsound.  Rather, any proposed merger, should be compelling for a firm to say “yes.”  If the match does not meet that standard, it is best that leadership step away from negotiations and wait until a suitable combination can be found.  Waiting for the right merger is not failure, it just means that further work needs to be done.

Merger for merger sake is a tact that should not guide a firm.  Instead, being disciplined when pursuing merger is a recipe for a good outcome.  Are there other important steps your firm has followed in its mergers?

 

 

 

 

Charles Darwin said  so profoundly “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.”

 

Our practice is seeing an increasing number of firms tested by their ability to adapt. The news reflects a growing number of firms in obvious transition. From high-profile names to lesser-known partnerships, the leaders of each firm faces pivotal decisions. Some of these firms will restructure or otherwise embark on a turnaround strategy.  Others opt for merging with another group or offering themselves as an acquisition target in an effort to  avoid dissolution. History has shown far too many end in a messy liquidation.

Identifying The Path That Leads To Decline

The decline of a once vibrant partnership rarely has much to do with the quality of lawyers engaged in the practice.  And though the marketplace is certainly tumultuous, what is at the heart of survival and success for some, and the dire straits of a struggle to survive for others?

In his book Corporate Turnaround, Dan Bibeault identifies four key mistakes that lead to organizational decline. These mistakes, paraphrased to the legal profession are:

  • Failure to respond effectively to a changing competitive environment
  • Poor control over operations
  • Overexpansion
  • Operating with excessive financial leverage

Let’s look at each one a bit more closely. Continue Reading Adapting to Survive

The typical press release announcing a law firm merger extolls the excitement, the opportunity to have one plus one equal three, and the great fit of culture, practices and people.  It’s perfect until it is not.  In fact, by some measures more than half of all law firm mergers fail. When the realization sets in that your law firm merger is a bad one and not the combination of your dreams, what can you do?

Besides whistling past the graveyard, you’ve got to do something.  And while a solution stimulated by panic is not recommended, prompt action is advisable. As action plan options go, the following three options generally are presented and often are considered:

Continue Reading Dealing with the Bad Law Firm Merger–Annulment, Divorce or Staying Together for the Kids?

I was very encouraged by a Bloomberg article regarding Katten Muchin Rosenman. The piece describes the strategic priorities of Roger Furey, the chair of the firm. The three top priorities are:

  • Getting the word out regarding the firm’s reputation. Reportedly, the firm has an excellent reputation with existing clients and the goal is to make the broader market more aware of this.
  • Determine what the firm’s clients view as their needs. As is the case with all firms (or for that matter, any service related business), understanding the needs of clients —   learning directly from them about what they are thinking and what they need — will allow the firm to better serve them (and when done properly, almost always result in organic growth).
  • Attorney development. The firm intends to better use its more senior lawyers to enhance the capabilities of its more junior lawyers.

Continue Reading A Quality Law Firm Strategy

Law firm succession planning represents an important component to law firm longevity.  The two forms of succession most often discussed-leadership and client relationship transfer-should be top of mind to any firm thinking about being an enduring institution.  While leadership succession can be a significant challenge, creating an effective client relationship transfer strategy is among the most complicated things to achieve.

In client relationship transfer, it takes four different parties to make it work.  First and foremost is the client without whom there can be no client relationship transfer.  Surprisingly, too often the client’s thoughts and perspectives on relationship succession are not prioritized, at least to the degree desired by the client.  If the client’s interests are neglected, there is little hope for a successful plan.

Continue Reading Law Firm Succession Planning-Thinking About a Realistic Client Relationship Succession Plan

I am interested in the interaction of a group of people who have a common goal, or a common obsession, each contributing something unique to make something greater than the sum of its parts. I don’t know why, but from day one, that has interested me. – Steven Van Zandt, Bruce Springsteen’s E Street Band

The recent news of departures from Carlton Fields Jorden Burt is most interesting. The firm, was the product of the 2014 merger of Tampa based Carlton Fields with DC based Jorden Burt. At the time of the merger the synergies between the two firms was promoted as one of the real selling points. Now, 5 years late, at least 30 of the 48 original Jorden Burt partners have left, including name  partners Jorden and Burt.

Continue Reading Law Firm Merger and Shared Aspirations

Fingerprints are unique.  No two snowflakes are alike.  And the more one looks at law firms, the more it is apparent that each law firm has its own personality.  Whether small or large, local, national, or international in scope, general service or specialized boutique, driven by profit or public service, each law firm has its own DNA.

Though distinctive, many law firms share common characteristics.  One shared by all law firms is the need to be financially healthy.  Law firm financial health is the universal need of every law firm—without financial health a law firm’s future is seriously suspect.

Continue Reading Optimizing Your Law Firm’s Financial Health in 2019-Four Areas to Focus Your Spring Cleaning

Every institution is vulnerable, no matter how great. No matter how much you have achieved, no matter how far you have gone, no matter how much power you’ve garnered, you are vulnerable to decline. There is no law of nature that the most powerful will inevitably remain at the top. Anyone can fall and most eventually do. –Jim Collins

Confidence

Jim Collins, the author best known for his positive and uplifting books Good to Great and Built to Last, wrote another provocative volume in 1999. How The Mighty Fallwhich looks at the causes and stages of organizational decline.

Continue Reading Overconfidence and Law Firm Decline