Category Archives: Insights

In-House Priorities, Concerns for 2013

Posted on April 10, 2013 by | Leave a comment

What are the law department priorities for 2013? That’s the question ALM Legal Intelligence asked of 126 in-house attorneys. And according to their report, “Corporate Counsel: Agenda 2013,” the top items inside counsel want to improve include becoming more of a strategic partner with company leaders, not just legal counsel (46 percent), and creating a culture of compliance within their companies (34 percent).

Topping the list of issues that respondents expect to be of most concern in 2013 are: doing more with less (39 percent), law department performance (37 percent), supporting company growth (37 percent), managing outside counsel costs (33 percent) and unforeseen crises (31 percent). The biggest risks are expected to include a steep downturn in the U.S. economy (28 percent) and a change in business conditions (25 percent); only 10 percent are concerned about the so-called “fiscal cliff.”

Yet, despite these concerns, fewer respondents say that they are brought in too late to be effective (29 percent this year versus 54 percent in 2011). “In another positive marker, the number of GCs who said they’re viewed as business ‘road blocks’ dropped—from 29 percent in 2011 to 18 percent in 2012,” reports Corporate Counsel.

Another surprise finding was that 67 percent of respondents listed partner responsiveness as the most important quality. This was a full 40 percentage points above the number who said “hourly rate charged” was the top quality. And a full 66 percent expect litigation to be the top matter to be outsourced this year, followed by intellectual property at 38 percent.

You can see select results of the report here.

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Managing ‘Toxic’ Clients

Posted on April 4, 2013 by | Leave a comment

Conflict happens, especially in businesses like law firms that involve highly emotional, often financial issues. Some clients, however, are just bad news. From combative attitudes to downright toxic personalities, these clients can make you wish you’d never gotten into the law. But you can’t turn them away.

“The fact is that as much as there are some clients that law firms would do well to turn away or fire, they won’t,” writes business psychiatrist Mark Goulston in an HBR Blog Network article. “They’re just too profitable.”

And so, you best learn how to manage them.

First and foremost, Goulston suggests you accept that these clients will be nasty. “Expect such people to act awful, especially when they’re not getting their way,” he writes. Go into the conversation prepared for their toxic reaction, and when they push back with something mean: Do not take the bait.

Goulston writes that you should instead calmly look the client in the eye and ask them a question that forces them to think about what they just said, such as:

  • “Say that again?”
  • “Do you really believe what you just said?”
  • “What was that all about?”

It would be ideal, however, to prevent bad behavior from the get-go.

“If you wait until crap happens (and it will), the likelihood of your conversation turning into a combative conversation is high and the ability for people to listen to each other when both are reacting is very small,” Goulston writes.

He suggests you prepare the client for eventual bad news by asking them how they wish to be told about such news. Then, once you hit a problem, you can then remind the client about how they wanted you to handle such situations and then give them the bad news.

“[A]n ounce of preparation,” Goulston writes, “is worth a pound of abuse.”

You can read Goulston’s article in full here.

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Work-Life Balance and Unhappy Associates

Posted on March 28, 2013 by | 1 Comment

Do you feel like your work-life balance is teetering on a razor’s edge? You’re not alone. Lawyers Weekly recently found that of the 529 lawyers they polled, nearly three-fourths believe their firm doesn’t care about or allow work-life balance. And the firms’ culture, not their overall polices, seems to be to blame.

When asked “Does your firm do enough to encourage its lawyers to maintain a work-life balance?” 36 percent of respondents replied that while their firm has polices in place, the culture of the firm doesn’t allow for work-life balance. A further 35 percent said that their firm’s only concern was racking up billable hours.

Yet nearly 15 percent added that it’s not the firm’s fault, but that of certain partners or practice group heads who demand long hours. Only 14 percent reported that their firm genuinely encourages work-life balance.

This lack of support for work-life balance may be why “associate attorney” tops the list of the least happy job in America, according to a recent CareerBliss compilation of the most and least blissful jobs. With an index score of 2.89 out of 5, associate attorneys came out as the No. 1 unhappiest job. The findings were culled from 65,000 employee-generated reviews taken nationwide in 2012.

“Associate attorneys stated they felt most unhappy with their company culture,” Heidi Golledge, chief executive of CareerBliss, was quoted in Forbes as saying. “In many cases, law firms are conducted in a structured environment that is heavily centered on billable hours. It may take several years for an associate attorney to rise to the rank of partner. People in this position rated the way they work and the rewards they receive lower than any other industry.”

Legal assistants also made the unhappiest list at No. 7, with a score of 3.38.

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Cost-Cutting, Time-Saving E-Discovery Tips

Posted on March 27, 2013 by | 1 Comment

Thanks to recent amendments in federal and state laws, the burden of e-discovery just got a little heavier—especially for small  plaintiffs firms that may have limited financial or personnel resources.

Cost shifting, the need for a forensic computer expert and the defense swamping the plaintiff’s firm with often-unnecessary discovery demands can greatly increase discovery costs. With this in mind, Law Technology News offers seven cost-cutting, time-saving tips.

  1. Plan and pinpoint your needs. First, take a global view and ask what you really need to win your case. Then pinpoint the resources—traditional paper discovery, computer forensics expert, etc.—that give you the most for your time and money.
  2. Learn how e-discovery works. There are many types of e-discovery available. But if you don’t understand how the information is stored, the various formats or searching methods, you won’t be able to best utilize e-discovery. LTN suggests you first learn the terminology by researching vendors and asking your tech-savvy friends.
  3. Find an information technology expert. Once you’ve gotten the basics and lingo, further ensure you can successfully obtain electronically stored information (ESI) by retaining a local IT expert.
  4. Hire a computer forensics expert. While spending money on computer forensics expert may seem to increase costs, LTN states that hiring a competent forensics expert to help obtain or restore any lost or damaged ESI will save money in the long run.
  5. Evaluate your opponent’s e-discovery systems. This is where hiring an IT expert pays off. LTN suggests having your IT expert evaluate the defense firm’s information systems with an eye on how to best craft your discovery requests, which can also help determine associated costs.
  6. Choose your own format. LTN notes that if you don’t specify the production format, your opponent can provide the e-discovery results in whatever format they deem “reasonably usable.” This may not be the best format for your case needs.
  7. Use the rules to your advantage. “When a defendant designates information as not reasonably accessible,” the LTN article states, “it must also identify, by category or type, the sources containing potentially responsive information that it is neither searching nor producing to you.” This can be used to your advantage by using the rule as a privilege log, which allows you to choose whether pursue the information.

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East vs. West: Client Satisfaction Higher in the East

Posted on March 26, 2013 by | Leave a comment

Client satisfaction is a global issue, yet it looks like Eastern law firms are better at it than those in the West. A new report finds that general counsels (GCs) in Asian firms rated their external firms higher for billing practices and service delivery than GCs in Western firms did.

The Client Satisfaction Report (CSR) Asia, the first of its kind from Legal Week, is culled from Asia-specific data in the Legal Week Intelligence Client Satisfaction Survey 2012. Of 1,204 respondents, 214 offered data about Asia in six categories: cost/billing practice; service delivery; use of IT/knowledge management; personal/partner relationships; quality of legal advice; and quality of commercial advice.

The biggest difference in the East vs. West client satisfaction scores were in the area of cost/billing practices. On a 10-point scale measuring satisfaction, Asian GCs rated their firms at 7.37, higher than the global score of 7.22. Asian firms also came in higher for service delivery and responsiveness and use of IT and knowledge management.

At 8.9, overall satisfaction was highest for firms in mainland China. It was the highest-rated of the five jurisdictions examined closely in the report. The others are, by rank: India, Singapore, Hong Kong and Japan.

Data was also collected about preferred billing methods. The survey found that 45 percent of Asian companies preferred fixed fees, 31 percent like capped hourly rates and 10 percent prefer chargeable hours.

Read the full rundown and discussion of the results on Legal Week (sub. req).

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Does the Two-Tier Strategy Still Work?

Posted on March 20, 2013 by | Leave a comment

The number of non-equity partners has risen in Am Law 200 firms, or so indicates a report from Altman Weil. Since 1999, the number of non-equity partners increased almost 20 percentage points. Yet, the report says, “in many firms the non-equity tier is not functioning as it should.”

In 1999, 66 percent of Am Law 200 firms had a non-equity tier with only 17 percent of all partners classified as non-equity. By 2012, that number jumped to 85 percent with 39 percent of partners in the non-equity tier. The report states:

Managed well, a non-equity tier can be a proving ground for new laterals, a transitional stage for rising stars, or a long-term berth for technical experts. Instead, it often becomes a warehouse for lawyers who don’t generate their own work, block upcoming talent and don’t add economic or professional value commensurate with their compensation.

With the average number of non-equity partners increasing from 36 to 109 per firm, the impact on a firm’s bottom line has also increase. It is therefore important for two-tier firms to reexamine the success of the strategy.

The report suggests that firms do the following:

  • Analyze short and long-term impacts on firm profitability
  • Rethink non-equity compensation
  • Establish tougher standards for entry and retention in the non-equity tier
  • Regularize performance evaluations
  • Systematically manage transitions out of the tier

To read the full report, click here.

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Law Firm Leaders’ Confidence Up, As Are Discounting Concerns

Posted on March 19, 2013 by | 1 Comment

It’s a good-news, bad-news kind of report. The good: As the economy has improved, so has managing partners’ confidence in both the overall economy and business conditions. The bad: Concern about discounting pressures from clients is also on the rise, as are concerns about cost growth. That’s the gist of the Citi Law Watch Managing Partner Confidence Index for the fourth quarter of 2012.

Citi surveyed managing partners at 76 law firms, rating their responses on a 200-point scale where 0-99 means lack of confidence, 100 is neutral and 101-200 is confident.

The numbers:

  • Confidence in the economy at large and in legal business conditions both improved 18 points between Q3 and Q4 of 2012 to 119 and 113, respectively.
  • Of the partners surveyed, 85 percent are confident of future revenue growth and 75 percent predict profit growth, with the majority predicting that growth for both will be moderate to low (below 10 percent).
  • When it comes to discounting pressures, 48 percent predict increased pressure while 51 percent say it’ll be unchanged—and none of the respondents said it’ll decrease.
  • Expenses are also predicted to increase, with 72 percent of managing partners expecting costs to grow.

“A lot of the discounting pressure that we’ve seen over the course of a number of years now, postrecession, has been driven by the fact that there’s not enough legal work to go around,” Gretta Rusanow, a senior client adviser at Citi’s law firm group, is quoted as saying in an Am Law Daily story about the report. “So, where firms have excess capacity, they are more inclined to discount their fees in an effort to keep their lawyers busy.”

Compounding the issue is the fact that clients know they have the advantage. “It’s a classic supply-and-demand imbalance,” Rusanow says in a Wall Street Journal (sub. req.) story. “If clients know there are more lawyers than work, they hold the advantage to demand discounts.”

Read the full report, which also includes data on demand and hiring, here.

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Increase Firm Realization Rates, Revenue

Posted on March 13, 2013 by | Leave a comment

The best things in life may be free, but your legal services are not. Yet an article from Altman Weil says that there are several factors that can cause a firm to undercharge (or not charge at all) for the services it provides. Increasing your realization rate—which fell overall from 88 percent in 2008 to 84.5 percent in 2010—will increase your revenue.

“There are three metrics that make up timekeeper revenue—demand, pricing and realization,” the article states. “The recession ravaged all three of these metrics.” Noting that there’s not much a firm can do about the lower demand for legal services or rising rates that barely match inflation, the article suggests firms can do something about increasing their realization rates. But first, firms must understand what causes their rates to be so low. A few of the issues the article examines are:

  1. Under- or un-reporting. Inexperienced lawyers may think they took too long to complete a task and will, therefore, cut the number of hours recorded. Or, due to bad time capture habits, may record much less time than was actually spent. Teaching younger lawyers to value their time, as well as electronic time capture, can help decrease underreporting.
  2. Write-downs. At the time of billing, Altman Weil “found lawyers reluctant to bill for fear that the client will not perceive the value of the work done and push back on the amount or not pay for it in its entirety.” It is therefore important to communicate with the client about the value of your services.
  3. Client adjustments. Aggressive, complicated billing results in slow payments and increased adjustments (i.e., write-offs and discounts) as clients push back because the bill was higher than they were led to expect. Keeping the client abreast of what is happening and why will help stave off any surprises—in either the billing or payment.
  4. Pricing variance. The billing rate may be different for various employees, functions and project, resulting in a pricing variance where clients are charged different rates for similar matters. This variance may cause clients to be undercharged, so firms need to determine whether the alternate billing rates are being properly applied.

Other issues that reduce realization rates include low billing efficiency and slow turnover of both billed time and client payments. The article points out that lower realization rates are significant, saying:

Some might wonder the significance of [lower overall realization data]. So what if realization dropped from 88 percent to 84.5 percent? It is only a 3.5-point decrease. The problem is rates went up only 7.7 percent for the same period. Thus, realization wiped out 45 percent of the pricing increase, leaving 2.1 points per year, roughly annual inflation.

For a more in-depth look at the issue and possible solutions, read the full “Issues in Realization” article here.

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Setting Client Expectations

Posted on March 6, 2013 by | Leave a comment

Like all relationships, navigating the client-lawyer dynamic can be tricky. It’s much easier if you set client expectations from the get-go.

“Early in my career,” writes Small Firm Innovation’s Jeffrey Taylor, “I recognized that there are two types of people: those who respect someone’s time, and those who don’t.”

Toward this end, Taylor emphasizes the importance of setting client expectations early. Clients must understand that your time (and theirs) is important. His rules for the first client meeting include:

  • Be open. Communicate openly about your expectations of their behavior, including the importance of being on time to meetings and calling only when it’s relevant to the case.
  • Be honest. You must be honest about your expectations for the client and their case, and clients must be totally honest to you, other lawyers, and the court.
  • Be blunt. Clear and concise communication helps avoid any miscommunications that could waste valuable time—or set the case back.

Taylor adds a few specific tips that work well for him:

  • Set boundaries. Taylor never gives clients his cell phone number or direct office number.
  • Communicate often. Taylor uses practice management software reminders to help keep clients regularly updated about how their case is progressing.
  • Empower staff. Taylor allows his staff to answer “the ever-present ‘what’s the status of this case’ question.” Clients can call and speak with his assistant (without a charge) for a quick update about the case status or to ask any generic questions.

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Only the ‘Most Adaptable’ Firms Survive

Posted on March 5, 2013 by | 1 Comment

The news is a bit grim. While U.S. firms had an OK 2012, a recent U.K. survey of partners found that 95 percent expect more law firms to collapse in the next two years. What’s a law firm to do? Evolve, according to a partner in a recent Wall Street Journal (sub. req.) story.

How?

Take a lesson from nature. It’s no longer “the survival of the fittest,” but the most adaptable who survive.

“Adaptability is the power to detect and respond to change in the world, no matter how surprising or inconvenient it may be,” writes Rafe Sagarin in an HBR Blog Network article. “All of Earth’s successful organisms have thrived without analyzing past crises or trying to predict the next one. They haven’t held ‘planning exercises’ or created ‘predictive frameworks.’ Instead, they’ve adapted.”

Drawing on what nature has to teach us, he found four practices of adaptable systems:

  1. Decentralization. For the most success, structure your system to avoid centralized control. This allows many individuals to independently see and adapt to change.
  2. Redundancy. While it’s not efficient, redundancy helps solve many problems. “Adaptable systems,” Sagarin writes, “make multiple copies of everything and modify the copies to hedge against uncertainty.”
  3. Symbiotic relationships. Symbioses extend an organism’s (or business’s) adaptability. They can occur between the most unlikely of pairs, with profound results.
  4. Recursive processes. Continuously build upon your successes.

Adaptation is a both a proactive and reactive process—and balancing the two processes is often difficult.

Robert Fafinski Jr., a founding partner of Minnesota-based Fafinski Mark & Johnson, got the balance right. He “knew the good times weren’t going to last forever and starting thinking ahead,” an ABA Journal article states. In the face of the recession, the firm cut partner pay yet expanded base practices. This positioned the firm to come back strong once the economy picked up.

“Everybody here as partners made less money, but we kept everybody employed,” Fafinski is quoted as saying in the article. “When the economy did come back in 2010 for us, we probably took off faster than most firms because we had the team ready to go. We’ve ended up getting rewarded for our patience.”

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