Eastman Kodak’s recent bankruptcy filing has me thinking about what impact, if any, the non-economic health of a law firm has on its long-term success.

Often described as the Google or Apple of its day, Kodak was a true titan of industry that thrived on a relatively simple formula— investment in people, investment in technology and the ability to understand the needs of its customers (“You press the button and we do the rest.”).

To be sure, there were many factors that led to Kodak’s downward spiral. So far, however, little attention has been paid to its commitment to human capital.

Kodak’s early investment in people was revolutionary. The company was able to attract top talent from around the country and bring them to Rochester, New York, the company’s global headquarters.

While other companies battled the labor unions, Kodak took a decidedly different approach by incentivizing their employees to such a degree that they had no interest in unions. Kodak built a movie theater, basketball court and even a bowling alley exclusively for its employees.

As a native of Rochester, the “Yellow Box” was an integral part of our community. I attended birthday parties at the Kodak bowling alley. Kodak was one of my first jobs — I had a high school internship that paid me $5 per hour, a fortune during a time when the minimum wage was $3.03.  And I grew up in a neighborhood full of Kodak dads, even though mine was one of the few in town that did not work there. For a long, long time, Kodak was a great source of pride the city.

Somewhere along the way, Kodak lost its rhythm. In 1975 it invented the first digital camera. Instead of paving the path for digital imaging, it refused to bring the camera to market in fear that it would cannibalize the film industry. By the 1980s foreign competition hit Kodak hard.

Around this time, Kodak’s investment in people also took a sharp turn. More than 16,000 employees were laid off. The bowling alley and movie theater closed. By the time I graduated from college in 1991, the only jobs available at Kodak were as independent contractors. No perks. No benefits.

That was more than 20 years ago, but Kodak was never fully able to recover and it’s more recent troubles have been heavily reported in recent weeks.

Shift gears back to the legal industry. In the 25 years leading up to the Great Recession, Big Law profits increased seemingly exponentially year in and year out.

When the economy crumbled, law firm managers acknowledged the need for fundamental change to its business model. The Wall Street Journal reported on the death of the billable hour. But instead of fundamental change as it related to the use of technology, legal project management and efficiency models, Big Law responded with layoffs and lots of them.

Three years later, at the first sign of clearing, are law firms looking at the long-term need for change? No. They have remained short sighted. The Big Law business model has survived and even thrived as law firms have started posting record setting profit per partner earnings.

In The American Lawyer’s recent Law Firm Managers survey, the number one challenge facing managers was failed lateral integration initiatives – and by a wide margin. Yet, according to author Steven J. Harper, (The American Lawyer, “Fed to Death,” December, 2011), “Tellingly, the non-economic well-being of their firms isn’t even on the responding managers’ screens, but it should be.”

Has Big Law proved that its business model can weather any economic storm or, like Kodak, is it merely at the beginning of long, protracted decline? I’d like to think positively, but — to borrow a line from Harper — “Unfortunately, the predicted phenomenon illustrates a persistent case of lessons not learned.”

Law firms have never been under more pressure to provide efficiency, transparency and pricing predictability to clients. Yet attempts to adopt business practices that will help lawyers better understand the way they work and inform decisions on how to better serve clients are proving extremely difficult.

In the eyes of most lawyers, you can not take the knowledge that’s been developed over years of training and practice and force it into a “process” that can be measured. Or can it?

The Harvard Business Review thinks it can. In an October article, “Lean Knowledge Work,” authors Bradley R. Staats and David M. Upton, argue that knowledge-based professions in IT, finance, engineering and law can benefit from the same principles that manufacturing companies like Toyota have employed. Their argument:

1) A substantial amount of knowledge assumed to be tacit doesn’t have to be.

2) Knowledge can be captured if the organization makes the effort to pull it out of people’s heads.

3) All knowledge work includes some activities that have nothing to do with applying judgement and can be streamlined by training employees to continually find and root out waste.

4) Systems and rules to guide interactions can be developed to improve collaboration even when knowledge is genuinely tacit.

Lawyers are trained to follow legal precedent. Although there is little precedent in applying lean principles to the legal profession, models do exist for transforming business practices in other industries. Maybe all we need is a little creative lawyering to apply those principles to the practice of law.

It’s December. The time you stop and wonder where the year went. I’ve been fortunate to have been extremely busy this year, but that is not an excuse to lose sight of my long-term goals. With winter just around the corner, now is the opportunity to refocus on priorities and develop a plan for the coming year. To me, planning must always begin with a discussion about vision.

Vision is one of those lofty words that can be off putting to some, but that should not diminish its importance. Vision is really about knowing who you are and what you want to be. I co-hosted a panel sponsored by the Center for Competitive Management earlier this month where I described vision as a practice group’s “WHY.” Another way to think about it is, “What does success look like?”

Regardless of how you ask the question, developing a short, concise statement of what you aspire to be is an essential component of a successful practice group plan. To ignore vision is to ignore defining what you are trying to accomplish. Equally important, from the perspective of building a strong practice group, a clear vision provides other benefits:

1) A vision provides your practice group with an identity. This aids in decision making about work that should or shouldn’t be done. It also drives decisions about the people side of the practice.

2) Discussions about vision offer an opportunity to emotionally engage members of the practice group. How often have you sat in practice group meetings, where colleagues eat their lunch, nod in the appropriate places and then go back to work without truly participating in the discussion? Meetings focused around vision offer an opportunity to engage your group. The point is not so much the words you end up using as it is the process of keeping your purpose at the forefront of everyone’s mind.

3) Vision guides planning. Once you have a clear vision, planning is easier. It also gives you a framework for ensuring your plans stay on track.

To be sure, law firms as a whole need to focus on vision. If your firm has a defined vision statement, then that should be the starting point for your practice group discussion. That said, even with firms that do have a vision statement, many attorneys are not aware of it or have not been part of the discussion to create it. Bringing vision to the practice group level offers multiple benefits in engaging attorneys. It’s a leadership opportunity.

In legal knowledge management and IT circles, the concept of Legal Project Management as a discipline has been a hot topic for the last two years. In marketing circles, … not so much. Amidst client development programs, service offering launches and the support and evaluation of new business opportunities, few law firm marketers seem to be thinking about how firm processes and technologies can reshape the fundamental value proposition of a firm.

But lawyers and marketing professionals who are thinking about how to reposition their firms to thrive in the future should consider the role Legal Project Management can play in that effort. Differentiating a law firm is harder now than ever before. The market is converging. The gap between the top firms and the rest of the playing field is widening. The firms at the top are getting the choice matters and are cherry picking the talent. There are few areas in which the rest of the field can still compete…. with one exception.

Firms of any size have the opportunity to demonstrate their unique value to clients by working more efficiently. Legal Project Management (LPM) principles provide the framework around which to do this.

LPM applies traditional project management concepts to the control and management of legal cases or matters. As explained by Jim Hassett in the July/August issue of Managing Partner (subscription required), there are eight elements of LPM:

• Setting the objective and defining the scope
• Identifying and scheduling activities
• Assigning tasks and managing the team
• Planning and managing the budget
• Assessing risks to the budget and schedule
• Managing quality
• Managing client communication and expectations
• Negotiating changes with clients

These elements are inherently part of any case or matter. The difference with LPM is that these steps are managed in an ongoing and consistent way. From a marketing standpoint, that translates into the following opportunities:

1. Enhanced Client Communication. Survey after survey reveal that client communication (or lack of it) is a primary driver of corporate decision making when it comes to hiring a law firm. With LPM, law firms have the tools they need to stay responsive and address issues in a proactive way with clients. LPM provides the tools for planning and managing a budget. It allows you to better manage quality. It also allows you to address unanticipated changes that invariably occur during the course of most matters.
2. Demonstrate ROI. The consistency that LPM brings to the table means there is an opportunity to demonstrate a quantifiable return on investment to clients — something very few firms have mastered successfully. Consider having the ability to conduct a post-matter client debrief in which you can evaluate the actual costs incurred against the original estimated budget, and then using that hard data to discuss ways in which you and the client might be able to improve management of a particular type of matter in the future.
3. Alternative Fee Arrangements. As we all know, everyone wants AFAs, but few people know how to put them together confidently. Fewer still know how to do so profitably. LPM provides the tools to effectively looking at the true cost of a matter, and the tools for better managing the matter during the project.

LPM as a discipline has the opportunity to make a lasting impact on how lawyers do business. But we all know change is slow to come, particularly if left up to the lawyers alone. Marketing professionals should get involved with their knowledge managers, IT and pricing colleagues to help drive this change.

With full credit to the authors of the  Intelligent Change blog, I was inspired to provide my two cents on the topic of, “Lawyers — Just do something.”

Having recently returned from ILTA, I was struck this year by the inertia I felt from many of the attendees. This is not a criticism of the conference itself. ILTA continues to provide high quality programming and the event is always run seamlessly. This year, though, participants, seemed… tired.

My focus for the show was on Legal Project Management. I wanted to learn more about what firms are doing and what success they were having. I talked to at least a half dozen AmLaw 100 firms, as well as a handful of vendors playing in the space. I quickly learned that few firms are making significant headway in this space. The universal frustration: the Lawyers.

It seems that project management is much simpler than change management. Unfortunately, in the legal profession, you can’t achieve the former without the latter. Unless there is a partner driving the change, there is little energy around trying to formalize the management of legal matters to create true businesses processes that can be used for creating best practices and alternative fee arrangements.

This brings me back to the Intelligent Change post, which concisely defines the problem — Change is hard, especially for lawyers; There are other more pressing problems (e.g. cash flow); and,  it’s hard (what worth doing isn’t?)– but makes an even more valid point. Just do something. Some thing.

It is not necessary to develop a strategy — whether for legal project management or something else — that solves all of the world’s problems. Build version 1.0 and maximize that to the hilt. Then move on to version 2.0 or even 1.5. In the end making any forward progress is better than standing still.

The International Legal Technology Association annual conference is just two weeks away. I love the show because I always learn about new and innovate ways to leverage technology to improve the practice of law.

It seems by now that discussions of technology and the law should be old news but it is amazing the number of lawyers who are still resistant to technological changes that will make their lives easier.

As an example, I received a call last week from a good friend who is a solo practitioner. She was incredibly frustrated at her computer networking system — everything from the cost of maintaining a server for four work stations to her inability to create PDFs on the fly and organize her Outlook folders. She was so overwhelmed by the thought of having to change to improved technology that she failed to see how many hours she was losing because her current setup didn’t work for her.

She had finally reached her tipping point.

After an initial evaluation of her current technology related costs and the cost of moving to a new system, she realized that for an up front investment of less than $1000, she will be able to save close to 75% in monthly fees compared to her current setup. What’s more, she will be able to work more efficiently and effectively. Although we are still doing due diligence, conservative estimates right now put her savings at about $4,000 per year.

But it isn’t just the hard cost savings. If we set her up right, she will save hours of unbillable time a week. This will let her focus more time on clients or get out of the office to develop new business. God forbid, she might even choose to save some of that extra time for herself.

This is not a circumstances that impacts solos and small firms alone. So many large firms are wedded to costly and cumbersome infrastructure that contributes to inefficiency and frustration. It is hard to come to a consensus on when, how much and what to invest in. But until they do, the cost of doing business with lawyers is going to remain high.

I’ll keep you up to date on how my current project progresses. If others out there are going through similar processes, I’d love to hear more…

They say admitting you have a problem is the first sign of recovery.

For most law firms, that means acknowledging that you don’t have a business plan for practicing law.

How is your firm doing? If you can answer the following 12 questions with concrete answers, you are on the right track. If not, it might be time to seek some help.

Where do you want to be in five years?

1. How much money do you want to make?

2. What types of clients do you want to work with?

3. What types of people do you want to work with?

4. How hard do you want to work?

5. What kind of business culture do you want to cultivate in your firm?

Regardless of whether you work for a global 25 firm or are a solo practitioner, these questions are important to address. They will define what success looks like.

From there, you have the foundation to answer the questions that will help you build a solid plan.

6. How much revenue do you need to generate to make the money you want to make?

7. How does your firm need to be structured to achieve your goals?

8. How do the clients you want to work with make legal purchasing decisions?

9. How do the clients you want to work with perceive you and your firm?

10. What unique value proposition do you offer your clients?

11. Who do you compete with?

12. Where do you rank against your competition?

With the typically slow month of August approaching, this is a great time to focus on the business side of your practice. Don’t be afraid to ask for help. It’s an investment that pays dividends.

I’ve been following with interest the debate prompted by so-called “scam bloggers” over the value of a legal education and the obligation of law schools to provide accurate data to students about post-graduate job placements.

I empathize with graduates entering the workforce in search of jobs that don’t exist. I appreciate the added stress on those that financed their entire education and are now facing the reality that they have to pay those loans back. But to those who feel shocked and even defrauded by these realities, I lack sympathy. They have no one to blame but themselves.

The country is recovering from the largest recession in our history. Law firms and legal services organizations have cut their staffs to the bone. The number of law school graduates entering the workforce is at an all-time high. What did you think was going to happen?

Law graduates are no different than any other graduate entering the work force. The legal profession isn’t facing anything that the medical profession, the accounting profession and countless others haven’t faced. The need for legal services is as great now as it ever has been. The difference is that the business of law has changed. .

If you want to be a lawyer, you need to change the way you think about a legal career. Law school graduates are smart people, so — right or wrong — don’t cry fowl because your law school tracks the editor of the law review as employed because she is working at Starbucks. If you want to be a lawyer, do your homework. If you are looking to graduate with a six-figure salary waiting for you, make sure you know the following:

1. The gap between the Global 25 firms and the rest of law firms is widening. That means there are going to be fewer high-paid associate positions.

2. Many legal services have been commoditized. That means lawyers can no longer command the same fees for doing the same work. That means the value of what you do as a first year lawyer has decreased. That means you get paid less.

3. The path to partnership will no longer come by grinding out long hours. If you want to make partner, you need to generate business. Equally important, you need to master relationship development.

To be sure, law schools should be held accountable for providing accurate data. To be sure, predatory lending to students should be addressed aggressively.

But, to be sure, law students and all graduates need to take ownership of their future. They need to decide what they are looking to get out of their education in the context of the overall cost of the degree.That’s called a cost-benefit analysis. That’s business. That’s what it means to be a lawyer in today’s economic climate.

Reflections on the impact of the emerging Global 25: Part 3

The first time I heard the term, ‘lawyer’s lawyer’ was during an interview with a senior partner about what made his firm different. His response was that they were “lawyer’s lawyers.”

He was referring to the reputation the firm’s lawyers held within the legal community — among their peers, their opponents and the bench. Being a ‘lawyer’s lawyer’ validates something that drives most every lawyer I know: The need to be recognized for being really good at what they do.

Unfortunately, it is no longer enough to be a ‘lawyer’s lawyer.’ It is not that subject matter expertise and professionalism are not important. They are. But those qualities are merely the price of entry. Lawyers today need to do more. They need to be ‘client’s lawyers.’

Client’s lawyers are true strategic partners. They focus on matter management, providing value-added services, forging strong client relationships.

Inside the law firm, they may not bill the most hours. But they are finding ways to make the work they do more efficient for their clients. Perhaps most significant is that they repeatedly bring in new business from the same clients over and over.

There is no question that the attributes of a ‘lawyer’s lawyer’ are important, but the true rainmakers of the future are those who can manage work effectively and build client relationships. Firms need to stop focusing on hours billed and mere reputation and start looking at the qualities lawyers hold as it relates to building repeatable business from profitable clients. That’s where the talent focus needs to shift.

As the gap between the emerging Global 25 and the rest of the firms widens, firms on the outside looking in need to rethink they way the value their own lawyers. Firms need to look at their partnership criteria and make sure that being a “client’s lawyers” is equal to, if not more important than, being a “lawyer’s lawyer.”

That’s the true point of differentiation.

Reflections on the emerging Global 25: Part 2

Legal is a profession, not an industry. Law firms are different; They don’t sell widgets.

These are the theorems I was first introduced to when I started covering law practice management for the ABA Journal after graduating from law school in 1998.

I challenged the first when I saw lawyers taking stock in lieu of fees during the dot com era. Clearly the “double comma” revenue lawyers that sprouted up after a successful IPO proved being a profession and an industry are not mutually exclusive. Lawyers are in the business of making money. Revenues from legal services are estimated at $210 billion in the United States alone.

With the gap widening between the Global 25 and the rest of the law firms, it’s time to challenge the second theorem. These elite firms will get the most profitable work and will be able to cherry pick the best talent from the other firms.

The rest are going to have to compete for the remainder of the work – much of which is being commoditized. Instead of fighting the inevitable, firms have an opportunity to provide more value to their clients by finding ways to productize what they do. Law firms outside of the Global 25 will need to fundamentally rethink the way they deliver legal services. They need to start selling widgets.

By selling widgets, I’m suggesting lawyers look to productize their services in a way that better demonstrates value and is priced accordingly. Whether you call it value-based billing or an alternative fee arrangement, its about packaging legal services in a way in which clients understand what they are getting for what price.

What’s more, it may actually mean that lawyers get paid for doing less work than they would if billing by the hour. Let’s face it, the things lawyers provide that add the most value — making a vilified defendant look sympathetic or opening doors a client might not even know exist — cannot be billed in six minute increments. So instead, there is pressure to make the “stuff” of lawyering — the documents, the briefs, the filings — to be created in an inefficient way in order to create enough billable hours to make the work profitable. In the end, whether it takes 10 hours or 100 hours, the “stuff” that is produced — so long as it is right — is worth the same. Why penalize those who produce the work more efficiently?

By billing at a flat rate or on a project basis, lawyers and their firms will be incentivized to work more efficiently on the paper work and to focus their efforts on the areas that truly make lawyers valuable — their role as a strategic partner.

Why not sell the widgets and differentiate yourself on the distinct strategic services you provide?