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Post #534 – Saturday, March 26, 2011
Join Me At The Managing Partner Forum
This year I’m honored to have joined the faculty of the Managing Partner Forum (MPF). The MPF began as a one-day, CLE-approved conference for managing partners with over 80 law firm leaders participating in the inaugural Forum held in October 2002. Since then, sixteen (16) Forums have been held, with more than 700 law firm leaders participating. These leaders value the Forum’s high-level participants, its outstanding faculty and its highly interactive format. The next event is scheduled for:
The Managing Partner Forum for Midwestern Law Firms
May 5, 2011 - 8:00am-5:30pm
Saint Louis Club – St. Louis, Missouri
Here are but a few important reasons why I think you should be there:
• Gain New Ideas and Fresh Perspectives from Other Managing Partners.
Our interactive format is what sets The Managing Partner Forum apart from other law firm leadership conferences. We have created a unique environment - we call it the "MPIE" - where you learn with and from other managing partners who face many of the same challenges you do.
Hear the Latest about The ACC Value Challenge.
If you aren't familiar with it, you need to be. Susan Hackett, ACC's General Counsel, will join us to provide an update on the latest developments. Is your firm ready?
• Have Fun with State-of-the-Art Audience Participation Technology.
Our Opening Session features state-of-the-art audience participation technology which allows participants to anonymously vote on hot topics relating to firm leadership. It enables us to provide invaluable bench-marking information that many attendees present at their firm retreats and partnership meetings.
• Meet and Build Relationships with Other Firm Leaders.
Managing partners often lament about feeling alone, with no one they can relate to back at the firm. Here, you'll meet many folks you can relate to, and chances are you'll leave St. Louis with a few new friends, as well. Where else can you spend an entire day with dozens of other law firms leaders from around the region?
• Learn to Be the Best Firm Leader You Can Be.
You're the CEO of your firm, and they probably didn't teach you much about how to lead a firm in law school. Suffice it to say, it's not an easy job! We'll provide the motivation, tools and benchmarking data to help you be the most effective firm leader possible.
CLICK HERE TO LEARN MORE & REGISTER
Post #532 – Thursday, March 24, 2011
When Someone Complains About Your Fees
I came across a thought-provoking little article this morning by my friend, Mike Schultz from RainToday. Here is an excerpt of the prescribed course of action for what you should do when some client or prospect says, “Your fees are too high; can you do it for less?”
The easy thing to do is to offer a discount, but that cuts into your profit margins and sets a precedent for the future. You don’t want to become a victim of discounting gone wrong. The glib answer is: focus on your value. Trite, but true. If it’s worth it to the client, they’ll pay for it. But when faced with fee push-back, many are at a loss for what to do in the moment. Here are six guidelines to follow:
1. Don’t backtrack: The fact is, it can be tempting to respond right away with, “How much can you spend?” or “Let me see what I can do to lower the fee.” Don’t just fold.
2. Confront competitor pricing head on: Folks are tempted to backtrack when the buyer says, “But I can get it from XYZ at a lower price.” At this point, many professionals give the indication that they’re willing to negotiate prices. Instead, acknowledge that competitors’ prices are, indeed, all over the map and leave it there—you’re basically saying, “I acknowledge other providers’ prices are lower than mine, but my fee is my fee.” Then ask the buyer, “Is there a reason you haven’t already rewarded them the business?” Some buyers will share why they’d prefer to work with you, and you can leverage these reasons to maintain your fee.
3. Don’t start talking cost structure: Imagine your firm has proposed a $15k / month retainer. Some clients will ask, “Well, how did you come up with that fee?” You then begin to rationalize the costs involved and the time required and so forth. Heading down this path is a slippery slope and leads to nickel-and-diming here, there, and everywhere. Think of it like this: if you went to buy a car and asked what the exhaust system cost or how much the dashboard set them back, you would probably get laughed at. In the same vein, you should not lift up the hood simply because you’re asked what your costs are.
4. Ask, “Which part don’t you want?”: When a client is considering a $120,000 project comprised of five major components or phases, ask them which they don’t want. You might find yourself going phase by phase, and as the client realizes they want the whole thing, you don’t cut any of your fee. Also, going step by step forces the client to consider what it would take for them to do that particular component of the work (if they could do it). All of a sudden they realize how much they’d prefer to pay you to get it done.
5. Don’t dismiss the buyer when they push back: Buyers are often taught to challenge price in multiple ways. Just because they challenge you doesn’t mean they are bad people or are destined to be bad clients. It also doesn’t mean they’re challenging your value personally. It often means they’re trying to figure out how to engage you and your solutions. Some professionals discount; others don’t. They’re just asking. Hold your ground and treat them reasonably in the process, and oftentimes they’ll just come around.
6. Offer financing and payment terms: For many buyers money is an issue right now, and they can’t buy because of the payment terms. Sometimes simply adjusting the payment terms is all the client needs to move forward.
Post #531 – Thursday, March 24, 2011
Do You Believe Those Inflation Numbers?
While it's true that a few "headline" economic numbers - like GDP growth and industrial production - are flashing signs of recovery, numerous other data points seem to be flashing red. I received an e-mail from my economist buddy today that focused a spotlight on a few irregularities . . .
A Fed governor recently tried to explain to an audience of ordinary citizens how the government figured the "core" inflation rate. The audience didn't go for it at all. They heckled the poor man. "When was the last time you went to the supermarket," they asked. The most recent inflation numbers tell us that prices rose 0.5% in February. For the mathematically challenged, this is an annual rate of 6%.
But wait . . . the Feds tell us not to pay any attention to this number. They want us to focus on the "core" number, from which they've taken out the things that are going up - food and energy. Having taken out the prices that are going up - even though they are essential items - they thus magnify the items that are left. Notably, housing. And guess what? Housing is going down. As an example, it has come to our attention that . . . one out of ever five houses in Florida is vacant. Holy sawgrass! How are the Feds going to show housing prices going up? So, falling house prices make it possible for the Feds to report a low "core" rate of inflation - which is a lie and a fraud. The average family is actually spending more and more money just to keep food on the table and gas in the tank.
And here's another irregularity from the Feds: it was widely reported last week that the unemployment rate was down to its lowest level in almost two years. The unemployment numbers are so cruelly twisted by the Feds we feel sorry for them. The most obvious way is by means of "seasonal adjustments." Look what seasonal adjustments did to the latest numbers. USA TODAY has the report:
WASHINGTON (AP) - Unemployment rose in nearly all of the 372 largest US cities in January compared to the previous month, mostly because of seasonal changes such as the layoff of temporary retail employees hired for the holidays.
Nationwide, the unemployment rate dropped to 9% in January from 9.4% the previous month. It ticked down to 8.9% in February. But the national data is seasonally adjusted, while the metro data isn't, which makes it more volatile. The metro data also lags the national report by one month.
See what’s going on? Fewer people actually have jobs, but if you "seasonally adjust" the numbers, unemployment is going down. Prices are going up everywhere, but if you take out the stuff that is going up, you see prices stable.
Post #530 – Wednesday, March 16, 2011
A BS Detector’s Review of the Latest Howrey News
A good friend of mine served on the executive committees and as an office managing partner of firms ranging from 25 to over 800 lawyers in size. He is an early riser, avid reader and loves to translate what is really going on behind the latest legal news. A couple of us have badgered him about getting his own blog as we sincerely believe that it would be among the best read in the industry. But . . . he’s shy. So, with his permission, I’m publishing his latest interpretation of today’s news concerning Howrey. I’m sure that you will find his commentary most enlightening:
Howrey's End Wasn't Foregone Conclusion
Posted by Brian Baxter
When Latham & Watkins partner Peter Gilhuly was contacted by Howrey managing partner and chairman Robert Ruyak last December to advise the troubled firm on its options, dissolution wasn't part of the initial discussion.
(So, they just hired the leading expert in the country for large law firm dissolution, a bankruptcy practice specialist, for his ability to advise on how to help guide a firm with a business model that works, even though more than 100 partners have left and distributable income is on track to be half of the prior year.)
"Very few firms think they're going to dissolve when you talk to them, so they don't hire you for that purpose initially, although they're aware of it as a possibility down the line," Gilhuly says. "Typically what happens is they have an issue with their bank and they're looking for advice on a broad scale of issues."
(So, law firms hire bankruptcy specialists to advise on line of credit financing. Is there any possibility that there is a concern that admitting to insolvency in December might be an admission that would require disgorgement of all of the distributions in January? Or that draws on the bank line of credit might be constructive fraud on the bank for which some partners might have personal liability?)
In time, as a firm's troubles grow deeper, Gilhuly's role often expands. That's what happened with Howrey. The firm had a rough year in 2010 with fading financials and fleeing partners. Given his background advising on the wind-down efforts of Thelen, Darby & Darby, and Brobeck, Phleger & Harrison, Gilhuly had the requisite expertise to counsel Howrey on its increasingly limited options.
(Now that it is clear you have leaped from the top floor of the building, let's talk about action options. But first, a few words about terminal velocity and the comparative density of your body and the sidewalk.)
It didn't take long before Gilhuly--and the Howrey lawyers who turned to him for help--realized that Howrey faced problems similar to those that plagued other recently defunct firms. As Gilhuly became more entrenched in the business of the firm, examining its books, and talking to its partners, he noticed that Howrey's focus on litigation had left the firm exposed in the aftermath of the economic downturn in late 2008.
(Ooooooooo, here it comes......wait for it.......alternative fees and low cost service providers unexpectedly arose and killed a healthy, well run law firm!)
To read the complete behind-the-scenes analysis of this article - download the PDF.
Pat Lamb, in his fabulous blog, In Search of Perfect Client Service continued on this theme with another commentary from our mtutal friend - "Here's the the same anonymous insider's view of the Journal article Law Firm Howrey to Hold Dissolution Votes. As Patrick McKenna did, I am copying key parts of the article with our anonymous ex-insider's comments in bold." Have a read.
Post #529 – Thursday, March 10, 2011
Practice Group Strategy Forum
Join me May 19 in New York when I will be both chairing and presenting at the Ark Group / Managing Partner Magazine’s 5th Annual Practice Group Forum featuring Lisa Damon the primary architect of Seyfarth Shaw’s version of Lean Six-Sigma, Steve Levy author of Legal Project Management, the extraordinary blawger Bruce MacEwen and numerous notable panelists from distinguished firms like Dechert, Haynes and Boone, Sidley Austin, Williams Mullen and Levenfeld Pearlstein.
You may download a copy of the program here.
If any of you are planning to attend, shoot me an e-mail and maybe we can get together for a cappuccino.
Post #528 – Tuesday, March 1, 2011
Confronting Firm Complacency
Three years ago, together with Baker & Daniels Chair Emeritus Brian K. Burke, I co-founded what is now known as The LAB (the Managing Partner Leadership Advisory Board) – a forum designed to provide recently appointed managing partners with a source for obtaining pragmatic advice on their leadership questions and critical burning issues. The formation of this group was the result of suggestions made during our bi-annual First 100 Days master class for new managing partners and has proven to be a valuable resource for new leaders.
Here is the latest question in a series of some twenty different queries that The LAB members have now responded to:
I am slated to become our firm’s next managing director. In now looking at what lays ahead, I realize that many firms have begun to confront the challenges of tomorrow – adopting alternative fee arrangements, outsourcing, social media, new IT capabilities and so forth. While our firm has been financially successful, I fear that my colleagues have become somewhat complacent. How would your group suggest I approach this situation with my partners, when I assume leadership of this firm?
Read: Confronting Firm Complacency
The LAB responses derive from its members' many years' experience as law firm leaders. Along with Brian and I, the LAB is comprised of the following distinguished current and former law firm leaders: Angelo Arcadipane (Dickstein Shapiro LLP); John Bouma (Snell & Wilmer LLP); Ben F. Johnson, III (Alston & Bird LLP); Keith B. Simmons (Bass Berry & Sims PLC); William J. Strickland (McGuire Woods LLP); Harry P. Trueheart, III (Nixon Peabody LLP); R. Thomas Stanton (Squire Sanders); and Robert M. Granatstein (Blake Cassels and Graydon).
Post #527 – Saturday, February 19, 2011
Warning: Inflation May Be Closer Than It Appears
Back on November 18, 2007, I posted a blog asking: “Is The Financial Day Of Reckoning Close At Hand?” (Post #254) suggesting that the collapse of the real estate market was getting close. I will now go on record as predicting that this is the year when inflation will begin to have a negative impact.
I use the term "inflation" here as the man on the street does. It is simply when prices for some of the basic necessities (food and energy) continually go up. That’s not the best definition, as it obscures why prices go up in the first place . . . and the reason is that governments everywhere can't help but print scads of money.
For example, the World Bank's latest data on food prices reveals an overall 15% increase from October through January. According to their data, global wheat prices have doubled between June and January 2011. The price of corn - which is used to feed the cattle, hogs and chickens that populate the meat shelves at your local grocery store - has surged 73% in the same period. Prices for sugar and edible oils have also risen "sharply.”
"Global food prices are rising to dangerous levels and threaten tens of millions of poor people," World Bank chief Robert Zoellick announced earlier this week. In India, food prices are at their highest levels in more than a year, rising 18%. In China, the typical Chinese also faces rising prices for nearly everything. The official inflation rate recently hit a 28-month high. But it's the surging price of coal that may prove to be China's Achilles' heel, at least in the short term. Coal is what powers the great boom in China. And coal is at two-year highs. I would suggest that the basics like food and energy will serve to dramatically slow the growth of these economies in 2011.
Inflation will likely get much worse, if history is any guide. I’m sure many of you remember the inflationary experience of the 1970s. The official inflation rate hit nearly 14% by 1980. In other countries, it was worse. In the UK, inflation topped out at 27%; in Japan, 30%.
In the U.S. wholesale prices jumped 0.8% in January. The producer price index (PPI) has now jumped 3% over the last four months. And that's not an annualized figure. Note that this PPI number is for "finished goods" - stuff that's ready to be sold direct to consumers. In the category of "crude goods," the figures are far worse - up 3.3% in January, and up a staggering 15.8% over the last four months.
Meanwhile, numerous reports from large multi-national companies indicate very clearly that inflationary pressures are building. Here's a sample:
DuPont & Co. - "DuPont forecast raw-material and freight costs to be some 4% to 5% higher this year than last."
Procter & Gamble - "P&G, which sells everything from Tide detergent to Olay skin-care products, said its commodities bill will cost $1 billion for the fiscal year that ends in June, more than double what it had expected."
Colgate-Palmolive - "Colgate's profit fell [in the fourth quarter] 1%...squeezed by higher commodity costs and money paid to promote its products."
3M Company - "Margins declined under rising material costs and weakening sales in the company's health care and graphics businesses... 3M said it intends to recover higher material expenses through price increases."
Pepsico - Hugh Johnson, Pepsi's CFO, talked about cost inflation of 8% to 9.5%: "That type of inflation has a pretty strong impact."
Goodyear - "Raw material prices costs are likely to rise 25% to 30% in the first quarter of 2011 and rubber prices have risen 40% since October 2010."
Whirlpool - It is "seeking to offset cost increases for such items as steel, copper and plastics..."
Electrolux - "The costs for our most important raw materials continue to increase," Electrolux CEO Mr. McLoughlin, said in a statement. "In addition to increased costs for steel, we also see considerable increases in resins (used in plastics) and base metals."
After reading these, do you know what impact your clients are currently experiencing?
For his part, the man printing all the money chasing these commodities, Fed Chairman Ben Bernanke, flatly denies any wrongdoing. The trillions of dollars he has injected into the world's economy have nothing to do with the escalating price of commodities, he contends. When asked about the impact of QE2 on global food prices, Bernanke responded that the destabilizing spikes are due to weather and rapid growth in demand for grains in emerging markets. As an admirer of Milton Friedman, he must know that "inflation is always and everywhere a monetary phenomenon."
As inflationary pressures build, forward-looking firms will want to start preparing. But that means that forward-looking managing partners will need to ignore all the assurances from Washington and Wall Street that "everything is under control." The latest testimony from the titans of global commerce demonstrates very clearly that Bernanke's promised "very low" inflation is starting to become uncomfortably high.
COMMENT RECEIVED (February 21):
And the question that then must immediately be asked is......."and what does this mean for legal service providers?"
In a nutshell, as against an already suffocating clamp on the revenue growth side that law practice depended on until late 2007, after which it was impossible to implement, there will be a powerfully resurgent rise in operating costs that cannot be controlled. The same "stuff" is just going to cost more. If we thought the pain was bad with the iron ceiling against rate increases and the adjustments made to preserve partner income levels (or more appropriately, the income levels of some partners), the squeeze to come now from the uncontrollable increases on the expense side is going to approach dental extractions without the benefit of anaesthesia.
This would be challenging enough with significant improvements in operations and efficiencis. But as we have seen, most firms have engaged in no such modifications. Almost everything has been other than true operational reform to improve efficiency. This is going to shorten the time component of getting it done. Stick with it, or start fresh, is going to be the question that comes to the top of the agenda for a lot of partners and firms this year. Edwin Reeser
Post #526 – Friday, February 18, 2011
People Handling Delusions
A twenty-year study of leadership effectiveness conducted by Stanford University’s School of Business concluded that about 15% of one’s success in leading organizations comes from technical skills and knowledge, while 85% comes from the ability to connect with people and engender trust and mutual understanding. The problem however lies not in this remarkable data, but with those who think they already have what it takes.
The real issue lies in delusional thinking about our people-handling competence. Reality likely belies your self-assessment. Over 96% of leaders today believe they have “above average” people skills. This is a statistical improbability. It is what psychologists call motivated reasoning, which means that once we decide something is true (for whatever reason) we make up reasons for believing it to be true. Most of us believe we are smarter, fairer, more considerate, more dependable and more creative than average. But we cannot all be “above average.”
This is not behavioral; it is neurological – it is hard-wired into the brains of normal, healthy people like you and me. Studies confirm that 75% of North American leaders believe they are “better” than others in their industry - thus, 90% of physicians, investment bankers, and lawyers (specialists who cannot afford to second-guess their decisions) rate themselves in the top 10% of their field, and 94% of university professors say they are above average teachers. Simply put, successful people are incredibly delusional about their skills and, as Andy Grove (retired Chair Emeritus of Intel) once advised, “Success breeds complacency and complacency breeds failure.”
The most important leadership skill is the ability to genuinely listen to people. Most of us assume we do this quite naturally. Think again. Research confirms that the listening proficiency level of over 95% of people tested falls between 17 and 29%. (And our tendency to think we are good at multi-tasking is likely fast reducing those percentages.) Listening is a skill. It can be learned and therefore improved. Unless, like others, you assume you are “above average” and don’t require such training – a choice that may be ego gratifying but also delusional!
Post #525 – Friday, February 18, 2011
Clients Say The Nicest Things
It should go without saying that all of us enjoy being appreciated. I have always been eager to work with nice people who are committed to improving their practices and their firm. That is, by far, my greatest motivator.
To that end, one of my clients is a firm with over 100 lawyers and government relations professionals focused on energy, environment and natural resources. This particular firm is a recognized top-tier Washington DC powerhouse and described by Chambers as “the best energy boutique in the U.S.” I was genuinely impressed to receive this kind (unsolicited) note from a member of the firm’s executive committee:
Thank you for taking the extra time with us. It was very interesting and informative, and your teaching continues to reverberate positively around the firm. In so many ways, large and small, we became better and more focused through those sessions.
I took your advice and read the material on your website. It is extraordinarily helpful --- straightforward, real-world and hard-won experience --- made more helpful by your analysis. Thank you for assembling it and providing it.
For my part, I would recommend you and your insights to anyone who asks or needs wise counsel on business development and management.
Richard A. Agnew, Office Managing Partner – Van Ness Feldman
Post #524 – Monday, February 14, 2011
Signal What You Value As A Leader
One of the more profound things that I learned, that I try to pass along to new leaders, be they managing partners or practice heads is to “act like you are on stage at all times, because you are!” Everything you do and say will send messages, set tone, establish expectations, and communicate direction about what is of priority to you. With that in mind, you need to carefully orchestrate what symbolic acts you may want to execute to create a lasting impression and convey what you stand for. In other words, you need to always think through:
• Where You Spend Your Time.
The primary thing that your partners will always look to is where and how you spend your time. Leaders spend time on whatever issues they think are most important. Examine your day-timer, compare it against the actual activities that consumed your time during just this past week and identify for yourself what your activity says to your colleagues about what you see as your most important priorities? Now, what do you want ‘your time spent’ to say about your priorities in the coming months.
• What You Inquire About.
Leaders who are successful are mindful to walk the job rather than get stuck in their offices. They ask lots of questions and listen loudly. The questions you deliberately ask and the attention those questions provoke sends a clear signal about the prevailing themes that occupy your thinking. Are the questions you want to ask of your partners and the topics you plan to focus in on consistent with the signals that you want to convey?
A classic and often misquoted study by Dr. Mehabrian from the University of California stated that the total impact of any message is based 7% on the words used; 38% on the volume and tone of one’s voice; and fully 55% on facial expressions and other body language signals. But, Dr. Mehabrian never claimed that you could view a movie in a foreign language and accurately determine 93% of the content by simply watching people’s body language. What is important to consider as a leader, is that the non-verbal aspects of your communication will reveal to people your underlying emotions, motives and feelings. Your colleagues will evaluate the emotional content of your message, not by what you say or what you inquire about; but by how you say it and how you look when you say it.
• How You Spend Your Budget.
What we purposely budget for and the way in which we choose to spend our money says a lot about our priorities and our values. What will your 2011 budget expenditures tell people about where you are focusing your leadership attention?
• What Specifically You Measure.
Usually an important indicator of what you think is important is specifically what you measure, what you generate written reports on, and what you track on a regular basis. If you say, that as a practice group or as a firm, we should be more focused on delivering value to our clients, are you rigorous about looking for more efficient ways to execute your deals and transactions; and constantly measure improvements in efficiency? Are you measuring the quality of the services provided and the client’s satisfaction?
• What You Celebrate and Rebuke.
Will what you publicly reward, those behaviors you identify and successes you celebrate within the firm reinforce the values and priorities that you as a leader are trying to emphasize? When one of the partners takes a measured risk with the intent of benefiting the firm and their actions fall short, is there a history of that partner being rewarded for their initiative or reprimanded for their failed efforts?
Again, I’m reminded of the words of one exemplary firm leader who counseled: “I learned that little gestures had significance. Everything you do is magnified, and you have to realize that. Even if you are a bit worn down, smile. People derive a lot of their outlook from the outlook of their leaders, and it makes them feel good if you appear in good spirits.”
The above represents my latest column for Slaw. Slaw identifies itself as “a cooperative weblog on all things legal.” Slaw has been publishing for five years and gets 30,000 unique visitors and about 100,000 visits every month. For the past two consecutive years it has been the winner of three different awards as the best legal blog. I’m honored to have been asked to become a regular columnist and invite you to comment on my latest meandering.
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