Posted by: johnocunningham | May 26, 2018

The State of the Legal Services Market and the Future Outlook

Hildebrandt Consulting and Citi Private Bank released a 2018 “Client Advisory” report earlier this year for law firms and legal service providers, and the report offered up some interesting insights that law firms should consider.

Some of the many insights provided by the report include the following:

  • Revenue growth and profit-per-partner growth are stalled in the 4 to 7 percent per year range, and likely will remain that way given the competitive landscape
  • Law firm demand growth has sputtered ever since the last recession
  • U.S. brand firms have recently started cutting into European market share as firms look to new markets for opportunity
  • Alternative legal service providers and in-house corporate staffs continue to supply a growing share of legal and quasi-legal services that law firms used to provide exclusively
  • Firms are bracing for the artificial intelligence revolution, and developing strategies to invest in or deal with e-discovery predictive coding, mass document review, large scale due diligence for M&A or other purposes, massive contract review and updating projects, and predictive analytics with regard to case outcomes, liability predictions and damages
  • Law firms are dealing with increasing levels of cyber-attack by criminals, developing more sophisticated cyber-defense strategies and buying cyber-insurance
  • Firms are currently looking at certain practice areas for the most growth opportunity, including white collar and regulatory investigations, tax advisory, project finance,and cybersecurity-related work
  • The technology, private equity, health care and life science industries are being eyed most closely for new client development
  • The numbers of professional and administrative staff supporting each lawyer continues to shrink over time as technology increases productivity and client demands drive competitive cost controls
  • The numbers of outsourced staff continues to grow slowly in response to the need for nimble adaptation to constantly volatile client demands
  • Nearly a third of equity partners are 55 or older now, which will necessitate greater succession planning

The report’s authors conclude that law firms can indeed adapt to the rapidly shifting market environment, stating that “We believe that law firms have historically been resilient in the face of changing market conditions and while change has come slowly, the law firm of 20 years ago bears little resemblance to the law firm of today.” If you have not checked it out already, it is worth a read.

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Posted by: johnocunningham | May 21, 2018

How Business Clients See “Value”

When I talk to law firms about the importance of providing “value” to clients, some lawyers object to the concept of being a “value” provider because they think it means being a “discounter.”

Then, I explain to them that this concept of “value” is very different from the business client’s concept of value, as the client often sees the greatest value in the most experienced lawyer who charges the highest hourly rate. Why? Because the client says that lawyer can answer a legal question instantly without need of research, offering the added value of practical insights and suggestions born of actual experience.

This is why many clients have started refusing to pay for first year associate time – because they see zero value in those lawyers, even if they are billed out at the cheapest rates. Some clients feel that first year associates are essentially interning on their dime and want the firm to absorb that time as a cost of doing business.

The concept of value – for the client – is really about what you are getting for the money. It is NOT about “getting a discount,” though some people may see that as one form of value.

The fact is that “value” comes in many forms, but it is the one ingredient that more and more business clients say they are looking to find. It is so important to in-house counsel that the ACC (Association of Corporate Counsel) initiated a “value challenge” several years ago, and the organization now gives annual awards for recognition of special value provided to clients.

If you want to figure out what corporate clients mean when they talk about “value,” you might do well to review the 2018 ACC profiles of “value champions.”

This is my 65th post in a series of monthly features that I have dubbed “Best of My Blog Roll.” The concept is simple – at the end of a month I peruse my own blog roll (see that column on the right) for material created by other bloggers that I think is most worthy of sharing with others, and then I report on it here.

Reviewing blog posts for the month of April 2018, I have chosen to highlight the following blog posts:

If you see a great post about professional service marketing, communications or sales, please share it with me. Hope you enjoy these posts.

Posted by: johnocunningham | April 25, 2018

An Overlooked Key to Success: Enforcing Standards of Conduct

Recently, the ABA Journal published an article by Karen Kaplowitz, entitled “Abuse of Power Within Law Firms: The Rainmaker Dilemma.”

This was an excellent piece that summarized the internal struggles that law firms face when contemplating disciplinary action against revenue-generating partners.

Having worked in both law firms and in-house corporate law departments, I see a number of ways in which law firms would do well to imitate their most successful corporate clients (and not the dumb ones that lose money and employees on the way to Chapter 7):

  1. When a power partner is accused of any form of misconduct, there should be a true independent fact-finding investigation and recommendation (would you tell a corporate client to investigate their own wrongdoing and reach their own conclusions without the aid of “outside” counsel?)
  2. Every law firm should have clearly articulated standards for behavioral conduct, preferably in a written “Code of Conduct” and those standards should be most strictly applied to the leaders of the firm – if you don’t enforce standards against the leaders, then nobody believes those standards are real.
  3. At a minimum, any violation of standards should result in progressive counseling, and any repeated violation requires termination. NO exceptions.
  4. Every law firm should go through leadership training at a serious b-school to understand how culture and values – or lack thereof – can make or break both the top line and the bottom line. If you want to deflate and de-energize your entire workforce, just try slapping a power partner on the wrist after they have engaged in bad conduct. You might as well post a sign in the halls that says “Our Firm: love it or leave it as is.” Oh, and if you want to lose clients on a massive scale, try being the subject of a front-page story or just a posting in “Above the Law” on workplace harassment, abuse or wrongdoing. By the way, nearly half the in-house counsel I have surveyed told me they have steered business away from firms after noticing or hearing about workplace abuse.
  5. Every law firm should consider appointing and empowering a well-respected senior officer to be in charge of ethics and conduct, and that officer should join the Ethics Compliance Officers Association or some similar professional organization to study and compare approaches to setting and reaching aspirational goals for behavior. The ethics officer also needs to learn and to communicate the proven economic value of good conduct.

Based on my interviews of some of the most successful managing partners at large firms around the country, I will add that firms would do well to look at the UP side of disciplining or terminating abusive rainmakers or other partners. As an extremely successful managing partner once told me after leading an effort that turned his firm from a sinking ship into a regional powerhouse, “You have to deal with the 800-pound gorillas to be successful, and that includes taking them out if necessary.”

These heavyweight abusers often sap the energy of their partner peers, as well as associates and staff working under them, and that has a huge impact on firm-wide productivity. They also tend to ignore any goals of rules set by others while enforcing their own personal dictates in Draconian fashion. No successful corporation would put up with it for a minute, but somehow professional service firms have let it go for way too long.

Posted by: johnocunningham | April 17, 2018

In-house Counsel Rankings of Law Firms by Industry

“Above The Law” recently published rankings of law firms according to survey metrics supplied by in-house counsel as client-respondents.

Since these rankings are done according to client opinions, they should be of some value and/or concern to law firms, which were scored and ranked according to their service in various industries, including the following:

  • consumer products
  • energy
  • media/entertainment
  • life sciences/health care
  • finance
  • technology

Overall, there were just 25 top tier firms and a little more than 20 in the second tier of scoring.

Ultimately, in the battle for survival, there is no more important metric than client satisfaction, and this is but one example of a survey intended to gauge it. Firms that are not doing their own surveys are not doing what their own top clients do – measuring customer satisfaction every year, if not every quarter.

 

his is my 64th post in a series of monthly features that I have dubbed “Best of My Blog Roll.” The concept is simple – at the end of a month I peruse my own blog roll (see that column on the right) for material created by other bloggers that I think is most worthy of sharing with others, and then I report on it here.

Reviewing blog posts for the month of March 2018, I have chosen to highlight the following blog posts:

  • A post by Lindsay Griffiths at “Zen and the Art of Legal Networking” entitled: “Success Requires Client Satisfaction.” This is a nice post that cites the work of the Disney organization as an example of constant improvement in customer satisfaction and service scoring;
  • A post by Toby Brown at “3 Geeks and a Law Blog,” which is entitled “The Law Firm COO of the Future.” This post examines the trend in law firm empowerment of COOs as business Sherpas, tacticians and educators essential to progress in an increasingly competitive world.
  • A post by Bruce MacEwen at the Adam Smith blog, entitled “The Use and Abuse of Words.” This post provides a thought-provoking distinction between the way that businesses and law firms look at and speak about profitability, productivity and other concepts.

All of these posts take a good, hard look at critical concepts – client satisfaction, sophisticated business management and descriptive measuring sticks – that affect the direction and competitive strategy and execution of law firms.

Posted by: johnocunningham | March 22, 2018

No “Safe Spaces” Left for Law Firms

Recent published reports on the state of the law firm industry have issued a clarion call about the future.

A 2018 Report on the State of the Legal Market by Thomson Reuters and the Georgetown University Law Center concludes that the transformation of the legal services market is accelerating.

This report, coupled with another recently published report on Law.com, reveals that so-called “alternative” legal service providers will have a greater share of the legal services market than law firms within the next 25 years at the current rate of change.

Services provided by AXIOM, LegalZoom, tech-as-a-service providers, and the Big Four and other accounting firms are all growing much faster than law firm revenues as a whole.

Clearly, the clients are voting with their dollars, and law firms will need to innovate, take risks and compete in new ways if they want to remain the dominant providers of legal services.  Competitors are aiming at every sector of services provided by traditional firms, aiming to provide faster, cheaper and better services in niche areas such as electronic discovery, corporate document filing and processing, basic wills and powers of attorney, litigation support, contracts and other basic needs.

For law firms, there are two challenges:

  • How to design and build better products and services that are more competitively priced; and
  • How to market those products and services to clients, and communicate the cost-benefit value proposition better

There will always be a space left for law firms, but it just might be very small and very unsafe in 25 years or less.

Posted by: johnocunningham | March 19, 2018

Best Blog Posts in February: Legal Pricing, Technology & Leadership

This is my 63rd post in a series of monthly features that I have dubbed “Best of My Blog Roll.” The concept is simple – at the end of a month I peruse my own blog roll (see that column on the right) for material created by other bloggers that I think is most worthy of sharing with others, and then I report on it here.

Reviewing blog posts for the month of February 2018, I have chosen to highlight the following blog posts:

  1. A neat post by Sue-Ella Prodonovich on her Prodonovich Advisory blog, entitled, “How To Get Your Pricing Right in 2018
  2. A thought-provoking post by Gerry Riskin on his Amazing Firms Amazing Practices blog, entitled, “Legal Tech As a Service
  3. A post by Michael Short on the LawVision blog, entitled, “Law Firm Leadership is Like Walking the Dogs

All of these posts will challenge law firm leaders to think critically about their topics – pricing, the use of legal technology, and leadership.

A recent research study developed by “Globality” in collaboration with The Lawyer found that General Counsel often prefer working with smaller law firms, but often lack the means to find those that are the right fit. The survey went out to more than 300 GCs from organizations with over $1 billion in revenue to uncover the latest industry viewpoint about hiring outside counsel.

Some of the findings in the report were:

  • Almost 70% of General Counsel rely on pre-existing relationships or referrals to source new legal providers.
  • Levels of dissatisfaction are three times higher with larger law firms than with smaller competitors.
  • When presented with a series of new legal technologies, 86% of survey respondents were most excited by tools for sourcing and/or communicating with legal providers outside of their immediate network.
You can read the full report at the Globality website to learn why GCs are increasingly relying on smaller firms and how technology can improve the efficiency and accuracy of sourcing the right firm for any given matter.
Posted by: johnocunningham | February 17, 2018

Law Firm Cyber-Security: Ethical Issue and Marketing Opportunity

Last year, the ABA Journal called cybersecurity “the biggest risk that law firms face.”

Last year was also the first time that multiple GCs on the RainDance Conference in-house panel of lawyers told audience members that cybersecurity issues were a factor in law firm hiring or firing. So now law firm clients can give you a thumbs up or down based on your technology.

Furthermore, the ABA Model Rules now require lawyers to become aware of “the benefits and risks of relevant technology.”

All of this presents both a burden and an opportunity for law firms. Those who adapt state-of-the-art cybersecurity measures and practices will not only be better protected, they can tout this battle-readiness to interested clients as an edge in sales pitches.

There are steps that law firms can take, and when they take them, they can inform their clients that proper protocols have been followed to protect their valuable data and communications.

 

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