Reflections on the impact of the emerging Global 25: Part 1

The American Lawyer’s “Second 200″ issue provides more evidence of the widening gap between the country’s largest firms and everyone else:  A $1.1 million gap to be exact. That is the difference in average profits per partner for the top 23 firms compared to those of the next 27 firms.

As discussed in my previous post, Time to decide what you are NOT good at, law firms outside the AmLaw 50 are losing both their top talent and their share of the most profitable work to what is emerging as the Global 25.

So where does that leave the firms outside the new elite?

According to The American Lawyer Editor-in-Chief  Aric Press, there is one consequence of the growing chasm between the law firm haves and have nots that few firms have embraced: rethinking core work processes to improve profitability and better serve clients .

This is the opportunity firms of all sizes can and must seize upon. For those outside the Global 25, it is an opportunity to control one’s destiny.

Fundamentally, this means that lawyers will need to stop equating working the hardest and the longest with productivity and profitability. They need to acknowledge that the aspects of their practices that make them feel the safest can no longer define them.

I’m talking about the “stuff” of lawyering – drafting deal documents, filling out forms, writing motions, filing court papers. In reality, this “stuff” is usually done inefficiently. It encourages lawyers to start from scratch instead of cutting and pasting, to draft a motion when an email can accomplish the same result, or to take 20 depositions when two will do.

These things take time and result in billable hours. But at the end of the day, it’s just “stuff.” The real value lawyers provide is what comes with that stuff. Opening doors for clients. Making a vilified client look sympathetic before a jury. Creative deal terms that make both sides feel like they won. Strategic advice on how to use the law to solve a problem or leverage an opportunity.

These skills are far more valuable that filling out forms but impossible to price in six minute increments.

Yes this means rethinking fee arrangements. Yes it means embracing so-called “disruptive” technology. Yes this will require consideration of concepts like project management and outsourcing – terms many believe to be “anti-lawyer.” Yes it means changing the definition of partnership and how you utilize associates.

It won’t be easy. It won’t happen overnight. But the chasm is already exists. How wide do you want it to get?

I recently started attending a networking group comprised largely of professional services executives. In talking with one of the founders of the organization, he noted that they’ve had a hard time keeping attorneys as active members.

He personally invited about 25 different attorneys to participate. They attended a few events but slowly dropped even though the organization itself had grown tremendously.

He believes, and I agree, that most lawyers just don’t understand how to network effectively and would benefit by taking a lesson from their counterparts outside the legal profession.

The Strategy of Networking

Networking is as much science as it is art. Too many lawyers think about networking as a single act rather than a process with rules that must be followed.

Rule #1: Engage

Networking is about building relationships with people who need your services or can refer you business.

A networking event is merely the first stage of this process. It’s a place people go to make introductions. That’s it. You don’t have to sell. You don’t have to buy. All you have to do is engage.

If that is outside your comfort zone — and you aren’t alone if it is — try this formula: Smile. Say, “My name is…” and ask a question. Chat for a couple minutes an learn what the person does and whether they are someone who might be of value in developing your business. Exchange business cards. Move on to another person.

Rule #2. Follow-Up

An introduction alone is not a relationship. That takes place after the event is over, starting with the follow-up.

Don`t wait for people to reach out to you. Send a short email to the people you met. Tell them you enjoyed meeting them. Mention something specific that you discussed. Offer yourself up as a resource in their efforts to grow their business. If they are a strategic contact — and not everyone is — suggest coffee or lunch.

Rule #3: Connect

Coffee or lunch is where the real relationship begins. This is a connection, not a sale. Your goal is to find out if this person can help you. Do this by learning everything you can about them and identifying how you can help them. The more you do for them, the more likely they will want to help you. Again, you need to follow-up.

Rule #4: Reciprocate

Chances are, if you are networking properly, the person you met is going to try to help you with another introduction, a referral or a business development idea. This is where the most important rule of networking comes in to play.

You have to reciprocate.

Relationships are a valuable commodity and sharing them is an investment that comes with a certain amount of risk. The people you are networking with are there for the same reason you are. They deserve the same return on investment as you.

I launched Law Firm Transitions a year ago this week. My goal for starting a blog was to join and help drive the conversation about changes law firms need to make to better serve clients. From my perspective, the business model needs to change.

So it seems apropos that I chose this week to report on a presentation Peter Zeughauser gave last month at the ALM Law Firm Marketing and Business Development Leadership Forum. Arguably the best legal strategist in the business, he caused me pause with his rosy forecast for the legal services market.

“The law firm business model is not broken. The reset button has not been pushed. It’s been a tough two years but there is a lot to look forward to,” Zeughauser told a crowd of about a 100 CMOs gathered at the Harvard Business Club in New York City.

In the context of the broader economy, the legal profession survived the financial crisis unscathed. Yes, we lost a few firms, but there were no bailouts. In the end, the larger firms proved fairly nimble, he said.

Yet his positive outlook came with some fairly dire undertones. Law firm consolidation, shifting global economic centers, and the disproportionate role multinational companies are playing in the economy — the trends Zeughauser says will have the greatest impact on law firm strategy — will make it an uphill climb for all but a chosen few.

Market Consolidation

According to Zeughauser, the AmLaw 100 is vanishing, giving rise to the Global 25. In 2010, the AmLaw 25 held 47 percent of the market share of legal services. These top firms will be able to cherry pick the clients and the top talent from all the other firms. They will simply not be able to keep up.

Shifting Economic Centers

The IMF has predicted that China would take over the US as the largest economy in the world by 2015. Capital markets are losing their dominance as private money plays a larger role. New York and London were once the dominant financial centers. That’s changing. Lawyers are a “follow the money” business, so this will have a huge impact on strategy. Firms may not need a global footprint to take advantage of the shifting financial centers, but they will need a global brand, Zeughauser said.

The Role of Multinationals

Multinationals make up less than one percent of the companies in the world but they account for 31 percent of growth in the U.S. gross domestic product. Relative to their size, they play a disproportionate role in the economy.

According to Zeughauser, if one believes the world’s economy is going to continue to grow, the future is bright.

The question I have is, “What will be left after the AmLaw 20 or 25 take their cut?”

This is where most firms find themselves. Zeughauser’s advice? Figure out what your NOT going to be good at. Saying you “do it all” is no longer credible. Firms need to have a clear vision and identify what it is they are best at. That often requires choosing what you are NOT going to be the best at.

That’s not to say that making such a choice does not come with its challenges. Firms need to assess what clients are most profitable, how to take advantage of global economic trends, and how they define what makes a successful partner.

For the chosen few, I agree with Zeughauser that the law firm business model may not be broken. For the rest, however, there is more work to do. I look forward to another year of the discussion.

I attended Legal Tech West in Los Angeles this week and tweeted for the first time during a CLE session.

Shortly after I did, I got a direct message from Kevin O’Keefe of LexBlog, Inc. He was attending the same session as me and suggested we meet. It was a great opportunity for me to get a perspective on social media from someone who has pioneered its use in the legal community.

Later, as I was walking into another session I saw a face that looked vaguely familiar. I realized it was Scott Preston, CIO of Fulbright & Jaworski. I recognized him from his Twitter photo. Because we “follow” each other and frequently retweet each other’s comments, it made it easy to walk up and introduce myself.

When I created my Twitter account a year ago, I didn’t “get it.” Everyone was talking about it, but I didn’t really see its impact in the world of law firm business development. I wasn’t convinced it would be applicable to lawyers who are still grappling with the basics of lead generation and branding.

A year later, I see Twitter as one of the most valuable business development tools available to me and to every lawyer out there.

There is no magic to it. Twitter is about good old fashioned networking.

Any good lawyer knows the secret to business development is relationships. Lawyers build relationships in a variety of ways. They participate in bar events. They join industry organizations. They attend trade shows and conferences. Their goal is to meet people they like and to build relationships that will turn into referral sources or new clients. The good ones choose their networking options strategically. They identify who they want to meet and find out where they hang out.

Twitter is no different.

You find people to follow on Twitter with whom you share interests. I follow people who do similar things in business that I do. I follow my clients. I follow people I would like to have for clients. I follow people who talk about things I am interested in outside of work — be it politics, or sports or other special interests.

In exchange I try to share things that I think my followers might find interesting. I retweet things they say to help them get their message out to a larger audience.

Some of these conversations turn into direct messages. Some turn into coffee or lunch.

Twitter has helped me expand my professional network. It has helped me understand my clients better. It has helped me stay abreast of industry trends. And it has even led to new friends who I count on as referral sources.

Aha… I finally get it.

“[INSERT LAW FIRM NAME] is a full-service law firm with market-leading strengths in the energy, financial services, real estate, technology, pharmaceutical, and [insert industry] sectors. Our multidisciplinary teams handle business transactions, M&A, intellectual property, corporate governance, complex litigation and anything else that could come your way. In other words, we do anything for anyone.”

With the exception of the last sentence, this description or a near facsimile could be found on any of hundreds of law firm websites around the globe.

Well-intended writers — usually at the direction of attorneys — often try to appeal to the widest possible audience of existing and prospective clients. The impact is just the opposite. The description ends up so broad that the message appeals to no one.

Buyers of legal services are more sophisticated than ever. They don’t have time to waste. And the competition for their attention is fierce. Too often law firms fail to reach their target audiences because they try to be everything to everyone.

Through market segmentation, law firms can gain greater insight into what drives the unique audiences they serve to buy legal services.

Market Segmentation

Simply defined, a market segment is a group of people who have similar demands and needs based on common characteristics, such as a shared demographic, geography, psychographic or behavior. As a result, the way a segment makes buying decisions is typically the same.

With an understanding of what drives and motivates a segment, you can create messages and identify specific marketing tactics that will allow you to get the attention of your audience.

A simple exercise to better understand a market segment is to consider the following:

1) What are the unique challenges facing this segment?

2) What specific benefits does our firm offer this segment?

3) How does this segment communicate?

Do this with two-to-three different segments and compare the results. Then look at the key messages your firm uses to market. Do they apply to the segments you’ve identified?

The reality is one-size marketing usually fits none.

What do you get when you cross a firm unaccustomed to pursuing business strategically with the internal announcement of a major business development initiative?

Answer: Confusion.

Many firm leaders coming out of the economic downturn realize that “random acts of marketing” are not going to see them into the future. They are adopting disciplined marketing and business development plans to grow their businesses.

For lawyers who were trained that business development is a way of life, a firm focus on driving revenues with a disciplined and strategic plan is common sense.

But there is a whole generation of lawyers — associates and young partners — who have spent the bulk of their career billing hours rather than building books of business.

This same group of lawyers has witnessed three years of law firm closures, layoffs and a decline in demand for legal services. It’s understandable that many live in fear of what their future holds.

As a result, an unintended consequence of a new strategic initiative may be that some attorneys actually perceive it as a sign of an underlying problem at the firm.

This shouldn’t deter firm leaders. Rather, it reinforces the need to craft clear messages that don’t assume everyone in the firm immediately understands why change is taking place.

Communication should happen globally and be reinforced in one-to-one communications with individual attorneys on an as needed basis.

An effective communication plan can take time as not everyone embraces change at the same pace. Ultimately, solid communication can clarify understanding and avoid otherwise unintended consequences.

My husband ran the Boston Marathon on Monday. Even as a spectator, it was a pretty amazing experience. Steve finished with a PR of 2:50:26, placing him 646 overall out of 27,000 runners. He smiled the whole time he was running.

Training for the race was time consuming. He qualified last October at the Chicago marathon. Since then, he’s had a plan in place that included weekly running goals for mileage and for time, group runs with friends who have more race experience than he does, and weekly visits to an active release therapist to help keep him healthy.

He did this while balancing work and family obligations. It was hard work, but he set a goal and was determined to see it through.

One of the biggest excuses I hear about marketing and business development is that there is not enough time. I say excuse not because I don’t think people are busy. We are. We all have demands on our time and we have to prioritize.

But time is a funny thing. There is never enough of it. But when you really want something, you’ll find a way to do it. You can find away to make it to your kid’s ball game. You can find a way to write that article for an industry publication. You can find a time to take your client to lunch.

And once you do all of that, you can think about running a marathon. After all, isn’t that what life is anyway?

It was a good week at work. One of my clients launched a major business development initiative. Another finalized materials for a marketing campaign to promote a new service line. A third got through a tedious set of meetings in preparation for a CRM deployment.

I even got my taxes done.

All of these projects — especially my taxes — could have been done weeks ago. What got in the way? Excessive planning.

Listen, no one believes in planning more than me. I’ve made a career out of  it. But when it comes to marketing and business development, there are times when planning gets in the way of progress.

Plans are not legal briefs. They do not require you to spot every single issue at hand — just the most important ones. They don not require every potential objection to be anticipated. They just need to be rational.

Plans are a simply a road map that define what you want to accomplish, how you are going to go about doing it, and what success will look like when you are done. If something doesn’t work, you can alter the course or change the approach to improve the results. For marketing and business development, the journey is half the fun.

Some times you just need to dive in and do it.

My birthday is today (yay me!) and my husband gave me a new iPad2 as a present. It’s very shiny and has a pretty blue cover that folds backward to create a computer stand. I know it is going to make my life easier and more fun both for work and at home.

I’m also a bit intimidated by it.

I’m pretty tech savvy and no one makes it easier to learn technology than Apple. But it is still different. I’m going to have to think about the “stuff” I do each day using my computer, cell phone and other technology devices, and figure out how/if I can do them better with the iPad. If I want to get the most bang for my buck, I’m going to need to do things different than how I do them now.

It’s really about change management. Even when change is good, it can still be hard.

Probably the toughest environment to manage change is inside a law firm. There are so many easy ways law firms can make themselves better — more efficient, more responsive, more effective — yet taking those steps seems to be so hard.

Take CRM technology. Client relationship management systems are probably the single most effective way to collaborate with your partners and take a disciplined, strategic approach to business development. But it requires many people doing things different.

Consider launching a new marketing initiative that will allow you to differentiates your firm and generate new business opportunities in a way that none of your competition is doing. If you’ve never done it that way before, it’s still hard.

Embracing social media, letting go of law firm directories, saying goodbye to unprofitable clients… Like the iPad, all of these things offer benefits but law firms are still slow to embrace them.

Let’s face it, change is a trust fall with the future. There are no guarantees. But do you want to sit from the sidelines while the competition boldly dives back, or do you want to experience the potential of what is out there?

I’m diving in. Hope to see you on the other side of my new two-way camera.

Star waiting for Sophie

My dog Star hasn’t made an appearance in my blog in many months, but I’m thinking about her today because we are contemplating a family addition — a new dog.

It wasn’t exactly planned. My friend just moved from a house with big yard in Denver to an apartment in Los Angeles. The move is great for her but it hasn’t worked out well for her dog, Sophie. So she and her son are bringing Sophie down to San Diego on Saturday to meet Star. If the meeting goes well, we may just take her in. We’ll just have to see.

Star loves everyone, but bringing a new dog into our home on a permanent basis is unchartered territory for us. There are a lot of variables at play. Some things you can see on the surface. Others take longer to uncover.

So we’ve put together a “dog integration” strategy. We’re going to start with a meeting. If that works out, we’ll do a week. The dogs can get to know each other. We can find out if they are compatible, see if it is a fit for Star, and see if it is a fit for Sophie.

It got me thinking about lateral partner hiring. It’s a tough business bringing in a new equity partner. While there are certain “check the box” things a firm can seek out in a potential candidate, there are a host of issues relating to culture, leadership, commitment and communication that can’t be uncovered during the “dating” process.

With lateral hires there are no trial runs. Law firms have to make the best decision they can with the information they have at the time and take their chances.  The best they can do is develop a comprehensive lateral integration plan to facilitate the transition.

My money is on the dogs.