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Post #541 – Monday, May 9, 2011
Talking About Firms That Fail
I received an e-mail from some colleagues last week that included excerpts from a recent interview with Jim Collins (one of today’s best-known thought leaders on management) that I thought I might share. I think that Jim’s comments here are right on point with identifying why and how a number of the major law firms have disintegrated over the past few years.
 There are many more ways to fail than there are to be great. It took us a very long time to distill the five stages of decline out of the vast volume of data we obtained from our studies.
The first thing you need to know about the five stages is that most firms would not be aware that they are falling until stage four. What’s really scary about this is that firms and their leaders are actually late in the process of decline before it becomes obvious that they are in decline. They still look healthy, although they are already mortally ill. The second point and the good news is that your firm can go a long way down and still come back. We have throughout history examples of organizations that fell, really stumbled, and yet came back as great enterprises. So the bottom line is: Unless you reach stage five, there still is hope.
Let me briefly describe the five stages. Stage one is hubris born of success; stage two is the undisciplined pursuit of more; stage three is denial of risk and peril; stage four is grasping for salvation; and the final stage five is capitulation to irrelevance or death. Now let’s look at each of those stages and how they sequence one into another: Stage one happens when people think they are successful and that their success is deserved. They don’t ask if their success was maybe an accident or based on fortunate circumstances. People begin to lose sight of the real factors about why they were successful in the first place, and that can lead to straying from what enabled them to be successful. Then they begin to think, well, we were successful at this, therefore we can be successful at something else. Or we can neglect what made us successful while we pursue these exciting new adventures.
The second stage flows right out of that. It is the undisciplined pursuit of more: It’s too much growth; giant acquisitions that don’t fit with what a firm truly can be the best at, that don’t fit with its values or its economic engine. The self-perception of the organization in stage two often leads to big, bold bets, and if they pay off, the firm and its leaders look great. But taking bets puts your enterprise at risk. If they don’t turn out well, then you can be in real trouble.
That brings us to the people part of the equation. The ultimate sign of the undisciplined pursuit of growth is when a firm fails to acknowledge Packard’s law – “No organization can consistently grow revenues faster than its ability to get enough of the right people to implement that growth.” That means if you allow growth and revenues and adventure and scale and all these exciting things, you will invariably exceed your ability to have enough of the right people in the key seats to execute on that growth brilliantly. So you’re heading for a fall.
Stage two really relates to putting the right leaders in positions of power. I don’t believe a single leader makes a great enterprise, but I think a single wrong leader can destroy one - if you put power in the wrong hands, that becomes hard to correct.
Stage three is the denial of risk and peril. The firm still looks fabulous, but there are warning signs. Little things start to come apart, often internal things that are not visible from the outside – like irritated clients who didn’t use to be irritated and changes in certain economic metrics, none of which of itself is catastrophic. But all the warning signs and the risks are there, and they are denied. Maybe the most important sign is the erosion of a healthy team dynamic. There is a marked decline in the quality and amount of dialogue and debate. Instead there is a shift toward either consensus or dictatorial management. Finally the game’s up and you fall. There’s no question about it; you’re in trouble and everyone knows you’re in trouble.
Stage four is when you react to that fall and start grasping for salvation. It is the search for that game-saving acquisition; the single charismatic heroic leader; the dramatic new strategy; the bold new vision; the program; the cultural revolution. But the problem is, if these don’t take you back to the basic disciplines that made your firm great, they don’t work. All of this directly leads to the point of no return, stage five, capitulation to irrelevance or death.
What’s very interesting – because we were looking at not just any enterprises but at great firms that fell – is not that they didn’t have strong values, it’s that they began to stray from those values. Then at the very time when they really need to refocus on their real values, with new practices, with new goals, with new strategies, with new structures, they tended to stray further and further away. Returning to the firm’s core values calls for a genuine process of reorientation.
Post #540 – Thursday, April 28, 2011
Deciphering AmLaw Profit Reports
 Ahhh, my good friend and favorite BS Detective (see my Post #530 on Howrey) is at it again and this time translating for us, the reality behind the news in today’s repots on the AmLaw 100 profit picture. So . . . let’s all take a closer in-depth look at the latest AmLaw 100 data:
Back in Black
The Am Law 100's partner profits jumped 8.4 percent last year as revenues rose and firms slashed their lawyer ranks.
by Robin Sparkman The American Lawyer May 01, 2011
After watching partner profits sink in 2008 (down 4.3 percent) and crawl back into positive territory in 2009 (a mere 0.3 percent increase), The Am Law 100 collectively exhaled last year as profits per partner jumped a healthy 8.4 percent.
(Actually, they didn't have a "healthy" increase at all, as the article goes on to say. The reports of a rebound are greatly exaggerated).
Firms heeded Obamaphile Rahm Emanuel's advice and didn't let the economic crisis go to waste. They cut overhead, principally by trimming head count at all levels, and reined in expenses. (Lavish retreats in exotic locales gave way to pedestrian events at the home office.) As the economy revived, the country's highest-grossing firms were able to convert modest revenue gains into profits thanks to their prudence. Here are a few other key stats from our rankings:
Gross Revenue. The Am Law 100's revenue jumped 4 percent last year, in effect making up for the 3.4 percent loss it posted in 2009. Firms benefited from the nascent recovery in capital markets and M&A. And even with clients' demands for discounts, firms were able to increase their "productivity" or hours worked and raise rates. Still, in "Drop the Scissors", the top officials at Citi Private Bank's Law Firm Group write that rate increases in 2010 "were roughly half the size of the annual rate in_creases in the boom years prior to 2008."
It's also critical to note that much of The Am Law 100's revenue growth came from two giants—DLA Piper and Hogan Lovells, a pair of vereins whose worldwide revenues are being included in The Am Law 100 for the first time, because of a change in our methodology. Leaving out those two anomalies, The Am Law 100's average revenue went up a meager 1.4 percent.
(This is the "real number" and it is nothing to get excited about, not only because it is small....but because it is not evenly distributed among firms. Overall, the year was stagnant for most firms.....assuming that 1.4 % in itself is not stagnant!)
Head Count. Firms continued to trim their lawyer ranks. The Am Law 100's attorney head count fell 2.7 percent in 2010 (or 3 percent if you exclude DLA Piper and Hogan Lovells). This was the biggest drop since we started ranking law firms almost 25 years ago. Equity partner head count alone slipped 0.9 percent last year, after dropping 0.7 percent in 2009.
(There were exceptions, of course. Quinn Emanuel Urquhart & Sullivan's total head count jumped 14.8 percent, and its equity partner ranks grew 22 percent—the biggest increases on The Am Law 100. Moreover, the spike in equity partner head count didn't weigh down the litigation powerhouse's PPP, which jumped almost 16 percent last year.)
(If you cut the numbers of partners who share in the pool faster than the size of the pool shrinks, you report "gains". It is ridiculous to claim that is an "improvement" in operating performance.)
And after a rather puzzling rise in 2009, nonequity partners at The Am Law 100 got the ax, too. Nonequity partner ranks fell by 1.7 percent last year as firms took a hard look at partners who didn't have their own books of business or whose salary creep over the years suddenly didn't seem worth the expense.
(This is not puzzling at all. Many of the reductions in equity partner headcount were from "de-equitization" of equity partners, which then in some cases were followed the next year by discharge or retirement, a two step process that is achievable in a way that direct dismissal of an equity partner may not be under the partnership agreements of many firms. In addition, many lateral entry partners are now brought in on a two step process as well, having to "prove up performance" before they become full equity stakeholders. This makes it easier to address mistakes in hiring, as equity partner dismissals are often more difficult. In 2010 the lateral hire market was the slowest in a decade.)
Revenue Per Lawyer. Not surprisingly, the cuts in head count and the modest uptick in billing rates led to a 4.4 percent increase in RPL for an average of $807,330.
(This is a bit more complicated, but with many headcount cuts occuring at the lower associate levels, and fewer hires of new graduates, more work was done by more senior, higher billing rate attorneys, so that the firmwide average billable hour simply cost more.....a hidden rate increase for the client base.)
To read the complete behind-the-scenes analysis of this article - download the PDF.
Post #539 – Thursday, April 21, 2011
A Report From The Legal Futures Conference
 I heard from a colleague today who (among 150 other delegates) attended the Legal Futures conference in London last week. He reported that our mutual friend Richard Susskind gave the delegates another taste of ‘what’s to come’ when he explained how law firms had to address these four key pressures:
1. The need to offer more for less.
He predicted that only lawyers who could deliver better and more accessible legal services at a lower cost – ‘more for less’ – would flourish in future. He cited successful innovations in this area such as the sub-contracting of legal work to English qualified lawyers in New Zealand and South Africa working on lower hourly rates; and the purchase of global LPO provider Pangea3 by Thomson Reuters, which he identified as “probably the biggest legal business in the world” comprising more than 1,000 lawyers and 2,000 software engineers. “I am speaking to general counsel, in-house lawyers … who are under pressure to take 50% off their legal spend with external law firms. This is pressure of an unprecedented sort,” he added.
2. The ‘liberalization’ of the UK profession.
Richard suggested that no one really could predict what would happen post 6 October but that ‘the market would do its stuff’ and that the opportunities provided by liberalization would attract interest from entrepreneurs and investors to this multi-million pound sector of the economy. Traditional general practitioners will be hardest hit, he warned, ‘because so many of them are doing routine and repetitive work that will be alternatively sourced’.
The ‘liberalization’ referred to has been brought about by the Legal Services Act which comes into effect on 6 October 2011. Apart from reforms to the regulatory regime, the main change will see the introduction of ‘Alternative Business Structures’ (ABSs) which are intended to create different ways to provide legal services, offer wider choice for consumers and break down barriers to entry. Among the notable changes, ABSs will allow for external ownership of law firms. The shake-up is designed to offer consumers of legal services better access to and value from legal services. Already there have been some innovative developments. For example, just a couple of weeks ago, the interestingly named national law firm network Quality Solicitors has announced a tie-up with bookstore chain WH Smith to place ‘Legal Access Points’ in hundreds of the high street retailer’s stores following a successful pilot.
3. The ‘commoditization’ of legal services.
He indicated that law firms would need to rethink their approach to delivering legal services beyond the traditional ‘bespoke’ approach, especially as the market demands it. Already, many law firms have standardized, systemized and packaged many aspects of their service and this, he predicted, will continue.
4. The exponential growth and impact of information technology.
Richard warned that too many lawyers believe they are immune from technological developments affecting the rest of society. He went on to outline a number of developments that are impacting significantly on the legal industry:
- the exponential growth of computer processing power that could mean desktop machines would be able to process information at the speed of the human brain by 2020 and as fast as “all of humanity put together” by 2050. ‘It might be time therefore for lawyers to rethink some of their working practices’, he joked.
- the imminent arrival of high-definition desktop video conferencing as a tool which could have a profound effect on the way lawyers practice.
- the development of online forms of dispute resolution driven by people’s desire to avoid litigation and disputes wherever possible. For example, he quoted eBay which gives rise to around 60 million disputes a year, many of which never get to settle without recourse to a the court process.
Post #538 – Friday, April 15, 2011
Random Thoughts
 As I travel around to my various client assignments, I will often scribble down thoughts and observations during the course of my work. Here are a few of my latest scribbles:
• There is a great deal of time and energy being focused today on initiatives like legal process improvement and project management – all intended to improve a firm’s overall efficiency. And there is certainly ample room to improve efficiency in most firms. Efficiency requires that we focus on costs and we need to do that. But, where is the resource and energy commitment to being effective? Effectiveness focuses our attention on opportunities to produce new revenue streams, to create new practices and new markets. It doesn’t focus our attention on how do we do this or that better. It demands that we focus our energies on which services and niches are capable of producing superior economic results and where might we achieve market dominance. The most efficient law firm will not survive, let alone prosper, if it merely becomes extraordinarily efficient . . . at delivering commodity services.
• THINK about this: Marketing is the tax you must pay for being undifferentiated and unremarkable.
• There are two kinds of professionals and firms in the marketplace – Eaters and Bakers. Eaters want a bigger slice of an existing pie. Eaters think that if they win, you lose and if you win, they lose. Bakers just want to construct a bigger pie, believing that then everyone can win.
• So much of leadership is about getting a team to work together. It’s not about being smart. It’s really about being able to bring together a group of people, get the best out of them and get them wanting to work as a true team toward achieving some goal. I think the building blocks that go into that are listening to people, really understanding what motivates them and getting them to push themselves beyond their comfort zones. And all of that is really having a basic psychological understanding and genuine interest in the people you’re trying to build a team with. I think if you come at leadership with an attitude of, “I’m going to do this, and these people are going to follow me and be my support team,” you’ll lose.
• Resistance to change is not a matter of people not getting it – it is because people DO GET IT, and they don’t like it! Your brilliant idea threatens something that is important to them. In most law firms we seem to spend too much time talking about the inspirational (“need to develop a vision”) part of leadership and far too little time on the perspirational (“how to bring about effective change”) part of being a leader.
• You need to meet with every new lateral hire, partner or associate, after they’ve been in your firm for three months. Ask each of them these two questions: “What is working for you here that you didn’t have before?” And “Is there something that you used to do at your old firm that we should be doing?”
• My father always used to say — “Be prepared, be overly prepared.” "Because", he said, "in life a lot of people are going to be smarter than you, but not a lot of people are going to be really prepared."
Post #537 – Wednesday, April 6, 2011
When Key Partners Defect
 According to some recent news three leading international law firms have been left wondering whether they are the subject of an elaborate April Fool's prank, after seeing a raft of senior London partners all walk out on April 1. My good friend (and former AmLaw 100 executive committee member) who shared with us his views on the Howrey fiasco a few weeks back (see Post #530 – March 16, 2011) today graciously shared his analysis for how to interpret these kind of sudden partner defections…
One of the tell tale signs of instability / pressure in a large US law firm is movement of key players around the end of the first calendar quarter - in the international offices!
Why and how does this work?
• Most of the international office operations are subsidized by the domestic US base.
While there are exceptions, this is usually the case. To have a proper platform the US firm has to get outstanding talent, and the only way to do that has been to pay a "premium" to buy that talent in the local market. With a very few and unique exceptions, once you tally up the net benefits associated with the work, and the "take" for the expatriate and domestic team in that office overseas, it is usually a money loser to the overall firm.
• International operations typically increase the per capita overhead of the firm.
There are significant costs added to the overhead for accounting and tax preparation, compliance with local laws on the treatment of employees, and almost no economies of scale. In addition, the fixed costs for many items (such as rent of office, housing, food and fuel, and taxes) are higher (London, Hong Kong, Tokyo, Paris), and in many markets one has to pay extra in the nature of housing allowances and other "expat packages" to get their associates and partners to travel abroad and stay for a few years. Many US attorneys are reluctant to go overseas for fear and concern (rightly felt) that it can often lead to their losing touch and the strength of their home contacts, ultimately costing them power and compensation when they return. If things do work out for them, in the nature of developing good business and contacts, they can make very good money, but at the cost usually of having to stay overseas for the duration. Those that tend to stay are often married to a local person or had a life long interest, desire or preference to move away and stay away. They don't necessarily fit will with the US culture of a law firm to begin with, and certainly don't after they have been out for awhile. They do present an attractive talent for other firms moving into those foreign markets, and thus with all these and other dynamics, they can be quite mobile.
• The foreign talent is able to compete against the US platform when previously it was difficult.
In some markets (such as China) the ability has evolved for the local talent that you develop to jump ship with clients and offer them comparable services at deeply reduced prices. (for years there was a two tier compensation arrangement established by the colonial firms out of the UK, where local Chinese lawyers received far less money for work, but there was nothing they could really do about it. If they left the firm, the client base was mostly UK and international firms with inbound work . . . so there was no way that they could take the business with them. However, in the last 20 years that has been changing and the power dynamic is now reversed in many regards. Once the local lawyers learn how to handle the domestic and outbound business, they take it away if they can, and they do. But the local regulations about hiring and firing local lawyers and staff that the foreign firms must abide by are very stringent and make it exceedingly difficult for them to lay off people if work slows. So there is a lot of subsidy of that variable cost, one's most expensive component, if work does not come in the door as planned. This feeds the frenzy to buy talent with books of business to keep those people busy, and further distorts the market dynamics).
• Relatively few partners in the home base benefit from the platform overseas.
Let's face it, how many members in the US offices actually get a nickel of business from having an office in London or Tokyo? But they all tithe to the increased overhead that makes it possible for partners in London to make fat seven figure incomes and big expense/business development allowances. It would not be unusual for a firm with a small number of offices in elite markets like London, Tokyo, etc. to have a per partner burden of $25k to $75k just for the privilege of having that city on the letterhead. Now, if you are a $2million a year partner that may not bother you. But you can bet a latte at your favorite coffee shop that for a $750k a year partner that a 10 percent per annum "tax" on this type of adventure can grate . . . and after two or three years of significantly reduced income and other pressures that the thought of, "why don't we just dump that mess we got ourselves into over in Brussels" comes up as a proffered solution / criticism.
To read the analysis - download the PDF.
Post #536 – Thursday, March 31, 2011
The Spring 2011 Issue of International Review Is Now Available
The latest issue of my International Review magazine has hit the desks of law firm managing partners everywhere. Once again this issue contains a number of pragmatic articles on law firm management and strategy:
 • Methodologies That Make Strategic Planning A Waste Of Time
by Patrick J. McKenna
Many firms involved in conventional strategizing are failing to improve their ability to differentiate themselves, their competitiveness or their growth. let's do away with these seven time wasters.
• About Scope Creep And Creepy Clients
by David H. Maister
How do you handle the client who is always changing, enhancing, modifying, backtracking, and re-hashing the project deliverables?
• Managing Partner Outlook: Another Year Of Clients Demanding More Value
by Patrick J. McKenna
In early January I posed a couple of questions to a group of managing partners representing firms from every corner of the country. here's what they told me.
• Confronting Firm Complacency: Notes From The Lab
by Managing Partner Lab
While our firm has been financially successful, I fear that my colleagues have become somewhat complacent. as a new firm leader, what should I do?
• Navigating A Few Economic Bumps On The Road To Recovery
by Patrick J. McKenna
Practically everyone believes that the economy is recovering . . . but there are a few continuing bumps that you need to take into account with your firm’s strategic planning.
• Leadership Reflections: Practical Advice For Those Who Manage
by Patrick J. McKenna
Excerpted from my blog, here are a couple of short snippets for reflecting on everything from what the next generation of law firm might look like to how we approach change.
I am pleased to have been putting out this magazine for some years now. It essentially started when I first began mailing copies of periodic articles I had authored to select managing partners back in the Fall of 1998. Today, I am (to the best of my knowledge) the only law firm consultant to publish his own magazine for firm leaders.
If for some reason, you haven’t received your Spring 2011 International Review magazine, either click on the cover above to download a PDF copy or kindly shoot me a note and I will be pleased to get a hard copy sent off in the mail to you.
COMMENT RECEIVED:
Patrick, I had been meaning to drop you a note. I was making it through my reading pile and read the International Review for Fall 2010. There were 3 articles I found of particular value that I had copied and passed on to others within the Firm. Of all the law firm management materials I read, I consistently find the two most useful and practical are: your magazine and LawPractice from the ABA. James T. Casey, Managing Partner
Post #535 – Monday, March 28, 2011
Consider A Strategic Planning Premortem
 You are at the stage of having worked with the members of your Strategic Planning Committee (SPC) for a number of months to finally come to the point where you have a draft strategic plan that has been approved by the partners and now needs some attention directed toward how certain components will actually be implemented. There are a number of actions contemplated that your fellow Committee members feel are critical and definitely need to be properly executed in order to make a significant difference. As an example, one such action item states:
"Develop and codify in writing, a set of ‘Client Service Standards’ that are accepted and consistently used by all attorneys in every practice area."
There is some discussion and concern amongst the members of your SPC as to how this is going to be effectively implemented. The concern emanates from a sense within the group that it has traditionally been very difficult to get lawyers to perform consistently, even so far as getting in their time-sheets on a regular basis is concerned. What to do?
As everyone knows it is common practice to conduct a “postmortem” or lessons learned session upon completion of any major undertaking. If your endeavor achieved its goal, the questions typically focus on what went right, what we did well, and how we might sustain our success. If your initiative fell short or failed to meet expectations, your postmortem efforts tend to focus on what went wrong and how we got off track.
That said, this may be a time to think about conducting a ‘premortem.’ A Premortem is a process to aid in identifying the potential roadblocks, before they have a chance of derailing your implementation efforts.
In a spirit of full disclosure, I confess to borrowing the term “premortem” from a McKinsey article entitled “Strategic Decisions: When Can You Trust Your Gut?” Not only is the article a fascinating read, it supports my belief that a good way to help ensure effective execution of your strategic planning specifics is to ask postmortem-type questions before, rather than after, the fact.
Here is how a strategic planning premortem could be preformed.
• Ask the members of your Strategic Planning Committee to assume that their draft strategic plan or some critical but contentious component of the plan (like the action item identified above) has either failed in it’s efforts to be executed or has been totally rejected by the partnership.
Your instructions to the group might be: “Everyone take two minutes and write down all the reasons why you think the undertaking failed.” This exercise asks the members of your group to be self-critical, before they prepare to move forward in implementation, and gets people to voluntarily engage in devil’s advocate thinking before the specific action item even gets started.
The team members can then be given a few minutes to individually write down all the reasons they can think of regarding why the plan has failed. Your role as a facilitator would be to have each member announce what is on his / her list.
In some instances, your fellow Committee members may lack the foresight to spot shortcomings. They may be so confident that they don’t see the need for a critique. In those situations you may benefit from bringing in some objective, trusted partners to read, review and serve as devils advocates to help identify any areas of the plan that may spark contentious debates.
• Now have the SPC members then determine different ways and actions they could proactively take to prevent the implementation of the specific action item from failing or being rejected.
Ask every member of the Strategic Planning Committee to suggest at least one action that they believe could help to reduce the likelihood of the plan being rejected – including possible revisions to the plan. You may likely hear, as I did when conducting this exercise recently, a number of creative ideas like:
- We could enlist a group of our more senior partners who are well-respected throughout the firm for their gifted client service abilities, as our ‘blue-ribbon panel,’ to help construct the client service standards based on the kinds of actions that they take on a regular basis.
- We could gather together a group of key clients to provide input into what our client service standards might include.
- We could publish the service standards on our web site and in engagement letters such that every client was made aware of the standards and knew what to expect from the lawyer serving them. This would serve as a catalyst for ensuring consistent behavior from amongst our lawyers.
Conducting a premortem can help you identify potential problems that otherwise would not have surfaced until they caused major damage to the strategic implementation efforts. This process is intended to heighten your Committee’s sensitivity to potential areas of contention and then prepare to either counteract or address those areas in a proactive manner. The goal is to prevent potential problems from occurring in order to increase the likelihood of success. For the amount of time invested, a strategic planning premortem is a low-cost, high-payoff activity.
The above represents my latest column for Slaw. ca 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.
COMMENT RECEIVED:
Thanks very much for your post. In working with small and medium size firms to facilitate strategic planning, our process focuses heavily on the execution portion of the planning process. It’s clearly much easier to develop a plan than to execute it in many organizations. The idea of a premortem exercise during planning is terrific. It is clear how many people issues can be anticipated and planned for using this approach. We’ll be employing premortems in all future working sessions, Patrick. Thanks again for the great idea.
Mark Lindwall, President, The Decisive Edge
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.
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