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http://www.patrickmckenna.com/blog
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Post #431 - Tuesday, November 24, 2009
Fixing Firm Compensation Models: To Fuel Value Focused Legal Delivery Systems
Following on a series of four articles about Alternative Fee Arrangements and co-authored by a Fortune 500 GC (Jeffrey Carr of FMC Technologies), a Managing Partner (Edwin Reeser), a leading practitioner in alternative fee arrangements (Pat Lamb), and a management consultant (yours truly), in November we set our collective sights to addressing a related issue - law firm compensation models. While there is no one standard framework or precedent to follow, each of these articles is attempting to provoke you to look at this challenge through a slightly different lens.
This PDF below contains our second series of four published articles:
• If You Pay For Hours, You Get Hours
Los Angeles Daily Journal - November 3, 2009
• Partner Compensation and The New Value Reality
Los Angeles Daily Journal - November 11, 2009
• Is your Partner Compensation System A Problem?
Los Angeles Daily Journal - November 17, 2009
• The Partnership Track: A Blind Race
Los Angeles Daily Journal - November 24, 2009
Download and read - Fixing Firm Compensation Models
Post #430 – Friday, November 20, 2009
Law Firm Rate Increases For 2010
As an active member of Legal OnRamp, I just happened to read a rant earlier today, posted by Susan Hackett from the Association of Corporate Counsel. Susan’s comments are extremely timely for those firms attempting to finalize their 2010 budgets. As I suspect that many of this blog’s readers may not have a chance to read what Susan had to say, I thought I would reproduce her comments for you to download and share with others in your firm.
 "I understand that most firms employ the business model of selling rates and hours, and thus the only way to make more money for them is to raise rates or increase hours. Since many are still struggling to secure the hours (even tho the billable "expectations" have not decreased), they'll seek to raise rates for the lawyers who remain working. But are they really that tone deaf? Do they really believe that the path to profitability requires increasing rates in 2010? Do they really not see not only the imperative (for their own survival and for longer-term-profit sustainability), as well as the opportunity, to start moving toward another business model of valuing their legal services based on the worth of what they sell and the efficiency with which they provide their services?"
Read all of Susan’s rant here.
Post #429 – Tuesday, November 17, 2009
Is Your Compensation System A Problem?
 So here’s the question for your next partner’s meeting or retreat: “If we never billed another client by the hour, how would we compensate our attorneys?”
Following up on our series of four articles written on the subject of alternative fee arrangements (see my Post #420), a Fortune 500 GC (Jeffrey Carr of FMC Technologies), a managing partner (Edwin Reeser), a leading practitioner in alternative fee arrangements (Pat Lamb), and a management consultant (yours truly) have now dedicated themselves to a second series of articles.
In this second series, the four of us have attempted to explore how a progressive firm might deal with one of the great impediments to adopting any new change – your firm’s compensation system. And while there is no one standard framework or precedent to follow, each of these articles is attempting to provoke you to look at this challenge through a slightly different lens.
This article appears in today’s Daily Journal. Download and read:
Is Your Compensation System a Problem? 
I will post the complete collection of all four of these articles next week.
Post #428 – Tuesday, November 17, 2009
Alternative Billing With A Yearly Subscription Strategy
 I’ve just heard about a Saudi Arabian law firm, Bafakih & Nassief who offers their clients unlimited advice in return for an annual retainer fee.
Apparently, under the terms of a specific 12-month fee arrangement, clients receive unlimited advice in a number of areas of the law that they choose. The legal advice provided typically covers the corporate, commercial and employment areas, although clients may choose to add other specified areas, such as intellectual property. Only third-party fees, governement fees and the costs of court experts in the case of litigation are excluded.
According to the firm, this arrangement enables them to study the client’s business over a period of time and in turn deliver custom-tailored legal services while the client controls the costs.
The firm claims it has already forged deals with over 10 large companies and fees typically range from $75,000 to $100,000 for a year. For the fee, the client may access the attorneys in the firm as many times as it requires and the firm claims that it guarantees a face-to-face meeting with a lawyer within 48 hours.
Post #427 - Tuesday, November 17, 2009
The Commercial Real Estate Crisis
In my August 2008 advisory entitled Managing Through A Prolonged Downturn, I identified 12 danger signs that when considered collectively would indicate that this recession may be far more severe and prolonged than one might expect. At that time, I suggested, that “if you are sick of hearing about residential mortgage problems, there is yet another potential crisis on the horizon – in commercial property." In my May 21 posting (#388), Listening To Economic Happy Talk, I reported an interesting statistic I just came across – “as a guiding rule, every individual laid off from their job results in 180 square feet of vacant commercial space. So if we’re currently seeing layoffs in the range of 600,000 a month . . . well, you can do the math.”
In 2007, a real estate company paid $281 million for the 42-floor office complex at 333 Bush Street in San Francisco. We all remember that address because the building primary tenant Heller Ehrman filed for bankruptcy and stopped making its rent payments. Well, apparently now the building’s owners have stopped making their loan payments and the lender is expected to begin foreclosure proceedings. So much for the unshakable belief that everyone once had in real estate never going down!
Now, according to the cover article ‘Deep Trouble’, in the November 16th issue of Business Week, commercial real estate prices have plunged 41% from their peak in 2007 (worse than the 30.5% fall in the housing market). The report tells us that the commercial storm is still gathering strength such that between today and 2012, more than $1.4 trillion worth of commercial property loans will come due (ain’t it amazing how the word ‘Trillion’ just crops up everywhere these days?) Banks are anticipating that borrowers will have trouble rolling over as many as three-quarters of the loans they took out in 2007.
Expect more commercial property foreclosures, expect more banks to fail, expect more property companies (like mega-shopping mall owner General Growth who declared bankruptcy in April) to go under; and according to this Business Week report, don’t expect the commercial real estate market to fully recover until about . . . 2020. OUCH!
Post #426 – Monday, November 9, 2009
The Coming Boom In Infrastructure
 I spent the better part of last week in New York on a client assignment and find it so hard to fathom how within a few years, this city will no longer be among the world's five largest. The new top five? Tokyo is Number 1 with a population (35 million) greater than all of Canada. Then Mumbai, Sao Paulo, Delhi, and Dhaka. Where is Dhaka, you might ask? It's the capital of Bangladesh (the newest center of outsourcing where senior partners are charged out at $25 an hour).
All of this suggests some big changes that will create enormous opportunities. Consider this from National Geographic Traveler: In the past 20 years, the world added about 3 million people a week to its urban populations and the fastest growing cities are all overseas. India has 40 cities with more than a million people; some Chinese cities are growing at more than 10% per year; and Africa's population should double by 2050.
The pace of urbanization is particularly swift in China and India. More than 25 million people move to cities each year. Some of the numbers are hard to fathom. As US Global Investors points out in a recent presentation, China will add more people in 15 years than the entire population of the United States. "There will be up to 50,000 new skyscrapers, the equivalent of building 10 New Yorks. There could be up to 170 new mass transit systems. There are only about 70 in Europe today."
This massive population shift has enormous effects on infrastructure spending. Trillions of dollars will have to go toward building power systems, roads, water and wastewater systems, ports and more. It's like what the US went through in the early 20th century - only on a much more massive scale. Future historians will wonder how we couldn't see this great boom unfolding before our eyes - the boom in the building of cities.
Post #425 - Monday, November 2, 2009
Questions To Ask Your Most Important Clients
Jim Hassett wrote a great little article posted on Legal OnRamp last week that I responded to. Jim talked about how important listening is to develop stronger relationships and new business.
Not disagreeing with the points made in this excellent article or the three questions identified . . . I will never forget one conversation that I had with a General Counsel who said, "Most of these efforts are defined and managed to serve the firm’s interests. To us they are nothing more than thinly veiled sales campaigns. Someone comes in, asks how their firm is doing and if we dare say okay, they then want to immediately introduce us to some of their other professionals.”
His comments serve as a constant reminder to me that when we interview clients we should probably be sensitive to making sure that the questions we employ demonstrate that we sincerely want to learn about their business, their circumstances, their frustrations, and not just about how they view us.
Some of the questions that I've found helpful in eliciting meaningful information from clients, include:
 • Are there any recent uncertainties affecting your business, or changes of any sort that have particularly concerned you in the last few months or so?
• When you’re driving to the office, stuck in traffic, and you’re thinking about the business, what issues are running through your head?
• What are your legal department’s three 'mission critical' objectives for the coming year?
• Are there specific things that outside counsel could be doing to reduce the time that you have to spend in managing their activities?
• Please describe the top three ways you measure outside counsel’s performance?
• As you think about the service that your law firms provide, what could an innovative law firm be doing, that clients like you, may not yet have asked for?
• When you think about the way in which you have observed law firms operate, what could a firm do that would make you go, “wow”?
• What could we be doing that would make your life easier?
• What would we have to do to deserve and earn more of your business and to obtain unbeatable referrals from you?
That said, I would really appreciate hearing from some in-house counsel that have had the experience of being interviewed one-on-one with their outside lawyers - what questions do you find you responded to with enthusiasm, and . . . what have you found to be the stupidest questions you were ever been asked?
Of Related Interest:
> Protecting Your Crown Jewels
> Enhanced Focus On Key Clients Yields Results
Post # 424 – Monday, November 2, 2009
Clients Say The Nicest Things
Having returned from a long trip to Chile last week to culminate my work with one international client, I received the following e-mail for which I am most grateful:
Good morning Patrick. Thank you for helping us advance our strategy sessions in Santiago. All the people I spoke with indicated that your presentation was exceptional. It more than met our expectations and the members are still talking about some of the thought leadership items you suggested.
 John E. Wolfgang, Chairman – UHY International
UHY is one of the world’s leading business advisory, consulting and accounting firms, with over 7000 professionals operating across 211 offices in 72 countries.
Post #423 – Monday, November 2, 2009
Dealing With the Economy
In an e-mail I received today from Tom Peters, he says that, “I am constantly asked for strategies / ‘secrets’ for surviving the recession. I try to appear wise and informed — and parade original, sophisticated thoughts. But if you want to know what’s really going through my head . . ."
Here are a few of the clever strategies that Tom shared in his e-mail:
• You dig deep, deeper, deepest—and always bring a good attitude to work.
• You try to forget about “the good old days”—nostalgia is self-destructive (and bores others.)
• You buck yourself up with the thought that “this too shall pass”—but then remind yourself that it might not pass any time soon, and so you re-dedicate yourself to making the absolute best of what you have now.
• You sweat the details as never before.
• You raise to the sky and maintain at all costs the Standards of Excellence by which you unfailingly and unflinchingly evaluate your own performance.
• You learn new tricks of your trade.
• You pass old tricks of the trade on to others—mentoring matters now more than ever.
• You remind yourself that this is not just something to be “gotten through” — it is the Final Exam of Competence, Character and, even if you’re not a boss, Leadership.
• You thank others by the truckload if good things happen — and take the heat yourself if bad things happen.
• You behave kindly, but you don't sugarcoat or hide the truth — humans are startlingly resilient and rumors are the real killers.
• You treat small successes as if they were World Cup victories — and celebrate and commend accordingly.
• You don’t put limits on the budget for flowers — “bright and colorful” works marvels.
• You redouble, re-triple your efforts to “walk in your client’s shoes” (especially if the shoes smell.)
• You leave the blame game at the office door.
• You become a paragon of personal accountability.
• And then you pray.
Post #422 - Saturday, October 31, 2009
Happy Halloween
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