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The career path for attorneys has never been more challenging. While lawyer job dissatisfaction is nothing new, rapid changes in the legal industry create uncertainties for attorneys who plan to practice law for another decade or longer.
Increased focus on profitability and changes in the law firm business model impact every lawyer:
- Service partners who rely on work from other attorneys risk being de-equitized or asked to leave their firms all together.
- Senior Associates know that the path to partnership requires building a book of business, but many lack the skills they need to do so.
- Solos and lawyers in small firms face their own challenges in trying to balance the roles of legal practitioner, client generator and business manager.
- Even revenue-generating partners realize they are only as valuable as the clients they bring in today. The pressure to remain productive is intense.
The path going forward for law firms has yet to be paved. At the same time, there are also new opportunities to rethink the practice of law in response to changing market dynamics.
Lawyers cannot afford to stand still without reacting to the changes going on around them. This is not an associate problem or a partner problem or even a law firm management problem. It is a lawyer problem. Mid-career attorneys need to start thinking about what they want their practice to look like in a decade and begin now to plan for that future. This includes:
- Clarifying why they do what they do and what their specific personal and professional goals are.
- Analyzing the market to identify and validate what their practice will look like.
- Consider what changes they can make in the way they deliver legal services to better respond to changing market dynamics.
It is exciting and a little scary to be a lawyer in today’s market. Marketing, business development and practice management are no longer distinct disciplines. Those that thrive will be the ones who evaluate their careers from all three of these vantage points and develop the discipline and consistency to execute on a defined plan for long-term success.
Debra Baker is a journalist, turned lawyer, turned business owner focused on helping law firms and individual attorneys transition their legal practices to drive revenue in a rapidly changing global economy. She offers presentations, training and law firm strategic marketing and business development consulting services. For more information on how she can help your firm, contact her at email@example.com or call 888.322.1226 ext. 701.
I participated in the Vistage All-City event in San Diego last week where Brian Beaulieu of ITR Economics spoke about how to stay ahead of the curve in light of the economic forecast for 2014 and beyond. His view: The long-term economic outlook remains dark with the next big downturn expected in 2018. Inflation and taxation will continue to plague the economy. The ITR outlook shows:
2013 – Flat
2014 – Slight Decline
2015-2017 – Growth
2018-2019: “Nasty” Decline
So what does that mean for the legal profession?
First, it does not mean that business will go away. The greatest drivers of the economic slowdown — increased taxes, healthcare costs, the Dodd-Frank Act and other regulations, will create business opportunities for lawyers.
Second, with economic downturn comes resilience. We have already witnessed a number of industries reinvent themselves to thrive in the coming decade. This will create more opportunities for lawyers.
Third, the U.S. remains the venue of choice for litigation both at home and for global companies doing business here. There will be no shortage of need for good lawyers.
All of that said, there is an important caveat: Point Four. Law firms cannot afford to wait it out any longer. We saw what happened to many firms that failed to respond to the signs that led to the financial collapse in 2008. The signs for 2018 and 2019 are clear. Lawyers must stop putting their head in the sand and start investing in their futures.
Here are two questions every lawyer must answer today:
1) What clients can serve that you are not currently serving?
2) What new services can offer that your current clients need?
The challenges facing the legal industry are no different than any other industry that has had to reinvent itself in light of changing economic conditions. Yet firms continue to be slow to change. In the next three years firms have a window to prepare for the future. But it will requires an investment of time, resources and capital. It is hard work, but one that will come with a payoff. The question is: Are you ready to make the change?
For the last several months, I’ve been refocusing my service offerings around ways I can help law firms and individual attorneys build law practices that will be sustainable beyond the next five years.
In doing so, I realized that several books have become fixtures on my desk. Two are directly related to the legal industry. The others have a broader focus. Combined they provide compelling insights about how to respond to the changes taking place throughout the legal industry.
Here they are:
1. The E-Myth Revisited by Michael E. Gerber: For an overall framework about how to think about your law practice as a business, this is a must read. There is a lawyer-focused edition of the book as well, but I recommend starting with the original.
Favorite theme: Focus on you business, not in your business.
2. The Art of Managing a Professional Services Firm, by Maureen Broderick (with research and interviews conducted by my good friend Carol McAvoy). This book outlines insight and best practices from some of the worlds best professional services organizations with particular focus on the unique issues that make service-oriented firms different from product-based businesses.
Favorite Theme: The passionate belief that values and culture are the bedrock of the organization and that clients are the “reason for being” when it comes to professional services.
3. The Challenger Sale, by Matthew Dixon and Brent Adamson. The Challenger Sale debunks the myth that relationship builders are the most successful sales people when it comes to complex sales, like legal services. Instead, the book outlines a new framework for solutions selling focused on providing insight to clients that naturally leads them to your services. This book is important for two reasons: 1) It provides a choreography for creating conversations that lead to business opportunities. 2) More importantly, it provides insight into how organizations at an institutional level can set themselves apart from the pack when it comes to defining what their true differentiators are. It could be game changing for the legal profession.
Favorite Theme: Once you eliminate “innovative,” “customer-focused,” “solutions-oriented,” “market leader,” “great people,” “trusted,” and “rich history” from the list, defining the specific set of capabilities that truly make you different can lead you to a pretty dark place. But then you can roll up your sleeves and set about the hard work of identifying real capabilities that only you can offer.
4. End of Lawyers? by Richard Susskind. Susskind offers up his prognosis about where the legal profession is heading as a result of globalization, technology and commoditization. It’s a slow read and you may not agree with all his conclusions, but the book makes you come to terms with the fact that the practice of law is going to change and offers one perspective on what it means for lawyers.
Favorite Theme: Most lawyers act like ambulance drivers showing up at the scene after something bad has happened. What clients really want is for someone to help them avoid that bad thing from happening in the first place. This is a huge market opportunity.
5. Networking is a contact sport by Joe Sweeney. A great book to rethink the way you approach relationship development and networking. Sweeney takes a purposeful approach to building relationships — both in terms of how he does it and whom he targets.
Favorite Theme: Networking is about seeing what you can do for others, not about what you can get.
Lessons from a judicial rock star: How business development is like preparing for a Supreme Court argumentAuthor: Debra Baker
U.S. Supreme Court Justice Sonia Sotomayor officially has reached rock star status with the crowds she is attracting for her book tour around the release of her memoir, My Beloved Life. I had the privilege of listening to her speak Sunday night at the University of San Diego, where she offered the perfect mix of wit, wisdom and inspiration to a standing-room only crowd.
She spoke for about 20 minutes but spent much of the time answering audience questions, one of which was about preparing for arguments before the Supreme Court. Her advice: “Engage us in a conversation.”
She explained to the crowd that when a case goes before the Supreme Court, the justices are prepared. They have read every piece of paper relating to the case and they understand the arguments. So to go before the court and engage in argument is not effective. Instead, the key is to listen to the judges and try to understand why they are asking the question that they have posed. Then, draw upon the arguments that you have made in the papers to address that concern. Have a conversation with them.
This advice bleeds into business development as well. Clients don’t want to know how smart you are or how successful you’ve been. They want you to listen to what they are saying and provide insight that will help them address their concerns. In doing so, you will demonstrate all of your other qualities. It is conversation, not validation, that prospective clients want from you.
Take it from a judicial rock star.
Over the last year, I’ve been analyzing my work with law firms to apply the lessons learned and improve the services I deliver to clients. In doing so, several themes emerged that impact — in some shape or form — nearly every client I have ever worked with:
1) The marketing function — whether handled by professional marketing staff, paralegals and secretaries or the attorneys themselves — typically has little coordination, resulting in “random acts of marketing.”
2) Business generators — the attorneys in the firm who bring in the business — typically work in silos, alone or in a small group, with little coordination in building a pipeline of potential work that meets the broader needs of the firm.
3) The so-called “marketing and business development being a continuum” is fractured, creating a gap between the two functions. This prevents firms from maximizing their investment in awareness, credibility and lead generation activities and makes revenue generation activities less efficient and more time consuming. Most often the gap is the result of a lack of alignment between a firm’s business vision (if one has even been defined), understanding of client needs (if an assessment has even been done) and talent management (the tools the firm provides to help attorneys become better business developers).
I started calling this the Law Firm Marketing Dilemma. Visually, it looks something like this:
If this diagram resonates with you, I would recommend taking three steps to make 2013 the year your firm overcomes the law firm marketing dilemma.
Where to start:
1) Business Vision and Marketing Alignment
Does your firm understand what its business vision is? There is no shortage of evidence that shows that the most successful and profitable professional services firms are those that have a clearly defined vision, culture and values. All too often, firms skip over this important question and dive right into tactical planning. Don’t. If you don’t define the end goal, you will never reach it.
2) Adding Value to Clients Beyond Tactical Execution
Conduct a client audit. Start by understanding your client base. Who are your clients? What do you do for them? Where are you most profitable? What are their similarities? What are the trends, needs, drivers impacting them? Beyond the legal matters your have done for them, look at the business challenges they have. What are the themes? Where are the missed opportunities? Again, this is not a superfluous exercise. You can’t market to prospective clients you don’t understand.
3) Define and Develop a Talent Management Strategy for Business Growth
What do the attorneys and professional staff need to support your business objectives? This starts by understanding your talent strategy — the way in which you want to utilize associates and professional staff. Once you know the goal — be it identifying future firm equity partners, leveraging associates to handle the tactical aspects of the law, creating business generators to tap into a new market demographic, or focusing a business model on the use of paralegals to provide greater cost efficiencies — you can identify the communication and training needs to help them achieve their goals.
With a defined vision, clear understanding of client needs, and a talent management strategy to attain them, you then have a starting point for focusing marketing programs and collaborative business development efforts that will generate greater consistency and overall return on investment.
The fifth of a five-part series.
The book and academy-nominated film Moneyball chronicles how the Oakland A’s transformed the business of baseball by proving statistics rather than subjective observations are a better measure of a team’s success.
Taking a page from Moneyball, I set out to prove that objective measures are a better predictor of performance in the legal industry as well. Here is what I found:
By analyzing law firm business risks and opportunities in the context of three performance indicators — Business Climate, Demand, Competitive Landscape — firms can pinpoint the type of client and nature of work for which they are best positioned to compete. They can then evaluate external and internal data to identify opportunities and make informed decisions about how they pursue their business objectives.
In my new report, “The LVS Law Firm Performance Index,” I use a matrix that compares nature of work (low to high risk) against type of business (SBE to Multinational). The LVS Law Firm Performance Index includes the full matrix so firms can assess their current competitive position against their goals and chart a plan toward success.
What makes the work exciting is that for the first time lawyers can use objective criteria to address a variety of ongoing business challenges, including:
• How do we retain existing clients and attract new ones?
• Should we brand around individual attorneys or the firm as a whole?
• What is the optimal size of our firm?
• Should we market our practice expertise or our industry knowledge?
• How can we be more profitable?
• What can we do to build a firm culture allowing us to attract and retain talented lawyers?
• How should I develop my own practice to achieve my personal career goals?
The LVS Law Firm Performance Index is an initial effort to define the measures that contribute to law firm success. It is my sincere hope that through this research, we will be able to help law firms address their most difficult business challenges so that lawyers can focus on what they do best: Serving the public through the practice of law.
Interested? Share your thoughts or contact me to discuss is more detail.
“If we act like the New York Yankees in this room, we are going to lose to the Yankees out on the field.”
- Billy Beane, Oakland A’s General Manager
Like baseball, the law firm competitive landscape is not an even playing field. Large firms continue to consolidate. The richest firms are getting richer. They are able to attract the best lawyers and win the highest volume of premium work. Where does that leave everyone else?
It depends on what you want.
Traditionally, the U.S. legal market was divided into two segments “Big Law” (often defined as the AmLaw 200 in the annual rankings by The American Lawyer magazine) and everyone else. The market, however, is quickly bifurcating into sub-groups based on global economic trends.
Although these groups will evolve, Legal Vertical Strategies segments the current market into five tiers:
Tier 1: U.S. firms LVS believes ultimately will be a part of a Global 25 based of the most profitable law firms. Currently, this tier includes 18 U.S. firms.
Tier 2: The remainder of the AmLaw 200 firms based on revenue.
Tier 3: Regional firms with muti-city offices.
Tier 4: Single office/city law firms
Tier 5: Solo practitioner
What do you want from your legal practice?
Big Law has a number of competitive advantages because of geographic reach, ability to staff cross-practice/geographic/ industry teams, ability to compensate talent, and market themselves at a national and global level. That means Tier 1 and Tier 2 firms will win the largest share of premium work and will continue to offer the highest compensation opportunities. It is also having a significant impact on law firm loyalty, culture and the concept of professional partnership. Large firms tend to have a greater pack mentality. Innovation tends to be slower and decisions often hinge on what their counterparts are doing.
Smaller firms will miss out on opportunities with multinational clients and large public companies. They may have trouble retaining quality talent due to lower compensation models. However, they also have competitive advantages as it relates to their ability to create niche practices, cultivate stronger client relationships, integrate technologies to differentiate themselves and build stronger firm cultures and attorney teams.
To be sure, there is no one size fits all definitions within these tiers. But Tier 3 and lower firms cannot compete for legal services in the same way that Tier 1 and Tier 2 firms do. A realistic assessment of a firm’s competitive position, therefore, can help firms define and clarify their long-term objectives.
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.
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.
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